GRAFTECH INC, S-1, 2000-07-03

GRAFTECH INC
S-1, 2000-07-03
ELECTRICAL INDUSTRIAL APPARATUS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GRAFTECH INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3629 34-1906664
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

11709 MADISON AVENUE
LAKEWOOD, OHIO 44107
(216) 529-3777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN J. WETULA

CHIEF EXECUTIVE OFFICER AND PRESIDENT
GRAFTECH INC.
11709 MADISON AVENUE
LAKEWOOD, OHIO 44107
(216) 529-3777
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:

<TABLE>
<S> <C> <C>
M. RIDGWAY BARKER, ESQ. KAREN G. NARWOLD, ESQ. WILLIAM J. WHELAN III, ESQ.
KELLEY DRYE & WARREN LLP GENERAL COUNSEL, VICE CRAVATH, SWAINE & MOORE
TWO STAMFORD PLAZA PRESIDENT AND SECRETARY WORLDWIDE PLAZA
281 TRESSER BOULEVARD GRAFTECH INC. 825 EIGHTH AVENUE
STAMFORD, CONNECTICUT 06901 3102 WEST END AVENUE NEW YORK, NEW YORK 10019
(203) 324-1400 SUITE 1100 (212) 474-1000
NASHVILLE, TENNESSEE 37203
(615) 760-8227
</TABLE>

------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) OFFERING PRICE(2) REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value $6,037,500 $18.00 $108,675,000 $28,690.20
$0.01 per share.........
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 787,500 shares that the underwriters have the option to purchase
solely to cover over-allotments.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

SUBJECT TO COMPLETION, DATED , 2000

5,250,000 Shares

Graphtech Logo

GRAFTECH INC.

Common Stock

------------------

We are selling 650,000 shares of our common stock and UCAR International
Inc., our parent company, is selling 4,600,000 shares of our common stock. Prior
to this offering, there has been no public market for our common stock. The
initial public offering price of the shares is expected to be between $15.00 and
$18.00 per share. We have applied to list our common stock on The Nasdaq Stock
Market's National Market under the symbol "GRAF."

The underwriters have an option to purchase from UCAR a maximum of 787,500
additional shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
8.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS GRAFTECH UCAR
-------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share..................................
Total......................................
</TABLE>

Delivery of the shares of common stock will be made on or about ,
2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

BEAR, STEARNS & CO. INC.

J.P. MORGAN & CO.

MERRILL LYNCH & CO.

The date of this prospectus is , 2000.
<PAGE> 3
Inside Front Cover

GRAFCELL Advanced Flexible Graphite and the Ballard PEM Fuel Cell

A portion exchange membrane (PEM) fuel cell produces electricity through the
chemical reaction of hydrogen and oxygen from the air. The process is clean,
quiet, and environmentally friendly. We believe Ballard Power Systems Inc. is
the world leader in the development of PEM fuel cells.

Inside Ballard's PEM fuel cell, two flow field plates made of GRAFCELL Advanced
Flexible Graphite direct the flow of hydrogen and air, conduct electrical
current, and help eliminate waste heat thereby increasing the efficiency of the
fuel cell. The proprietary properties of GRAFCELL Advanced Flexible Graphite
together with Graftech's high-volume manufacturing process reduces production
time and costs. Ballard's latest fuel cell stack uses GRAFCELL Advanced Flexible
Graphite in flow field plates to increase its power density, to reduce its size,
and to reduce its weight. The result: more power from each cell at lower cost.

Two Flow Field Plates made of
GRAFCELL Advanced Flexible Graphite
and a membrane electrode assembly
make up one PEM fuel cell

[Diagram of
Fuel Cell Stack]

Hydrogen
and air flow

to the electrodes through Hundreds of single cells
channels in the GRAFCELL combined together form one fuel
Advanced Flexible Graphite cell stack to produce the needed
electrical power

FLOW FIELD PLATES MADE FROM
GRAFCELL ADVANCED FLEXIBLE GRAPHITE

Distribute hydrogen Advantages
and oxygen and remove Thin, Lightweight, short
water from the reaction zone manufacturing cycle, highly
conductive, and cost effective

GRAFTECH
<PAGE> 4
Inside Cover Artwork

Graftech Inc. - the world leader in the development of high
quality natural graphite-based products. Graftech Inc. -
providing solutions and products for a changing world.

--------------------------------------------------------------------------------

OUR STRENGTHS

* History of product and solution innovation
* Requirements contract with Ballard Power Systems Inc.
* Technological and manufacturing excellence
* Research and development
* Intellectual property
* Strong customer relationships

OUR PRODUCTS

GRAFCELL Advanced Flexible Graphite

[Picture of [Picture of
Flow Field Plate] Fuel Cell]

GRAFOIL Flexible Graphite

[Pictures of Flexible Graphite]

GRAFGUARD Expandable Graphite

[Picture of Expandable Graphite]

GRAFSHIELD Heat Management Products

[Picture of Heat Management Products]

AUTOMOTIVE AND INDUSTRIAL SEALING BUSINESS

GRAFOIL Flexible Graphite products are a
significant portion of our net sales.
Head and exhaust gaskets and high temperature
protective shields made of GRAFOIL Flexible
Graphite are used for many internal combustion
engine applications.

GRAFOIL Flexible Graphite pipe flange gaskets
and valve packings withstand high temperatures
and are inert to most chemical gases

[Picture of Engine with
Flexible Graphite Gasket]

EMERGING FUEL CELL OPPORTUNITIES

PEM fuel cells, using GRAFCELL Advanced Flexible Graphite
currently target the following applications:

[Picture of Flow Field Plate] [Picture of Fuel Cell]

[Pictures of Automotives use PEM Fuel Cell Engines]

Transportation
Replacement for the internal
combustion engine for
automobiles, buses and trucks. [Picture of Motor Home]

Portable
Including portable power generators
for equipment such as household
appliances and electronics.

OTHER EMERGING OPPORTUNITIES

THERMAL MANAGEMENT APPLICATIONS FIRE PROTECTION APPLICATIONS
ELECTRONICS CONSTRUCTION MATERIALS
Advanced Flexible Graphite offers GRAFGUARD Expandable Graphite is
significant design advantages when enabling the building trades industry
used in computer products, tele- to meet increasingly stringent fire
communication systems, analytical safety codes. Graphite flake expands
instruments and other electronic when treated, forming an insulating
devices due to its: layer which protects the underlying
material.
*Excellent ability to transfer heat
*Mechanical and thermal stability GRAFGUARD Expandable Graphite is well
*Lightweight compressible and suited for use in:
conformable nature * Wood and paper products
*Cost competitiveness * Coatings
*Ease of handling * Plastics
* Fire stop and fire barriers
* Aircraft and rail seats

[Picture of AND MANY MORE
Computer] Can be used in batteries, supercapactiors,
and as insulation for high temperature
industrial furnaces because of its:

*Electrical conductivity *Thermal characteristics
[Picture of *Thin and formable nature *cost effectiveness [Picture of
Cell Phone] Industrial
Furnace]

OUR BUSINESS STRATEGY

*Capitalize on our relationship with
Ballard Power Systems Inc.
*Innovate through research and
development
*Identify and develop growth
opportunities and increase
market awareness of our
products
*Pursue strategic alliances
*Aggressively protect our
intellectual property

OUR RELATIONSHIP WITH BALLARD

Graftech Inc. has formed a strategic
relationship with Ballard. We believe
Ballard is the world leader in the
development of PEM fuel cells.

RELATIONSHIP HISTORY

1992 Specific products for PEM
fuel cells introduced
1994 First secrecy agreement
1996 Second secrecy agreement
1999 Collaboration and requirements
contract established
2000 Ballard MARK 900 fuel cell
stack uses GRAFCELL Advanced
Flexible Graphite

GRAFTECH
<PAGE> 5

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................... 3
RISK FACTORS.......................... 8
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS.......... 16
DIVIDEND POLICY....................... 17
DILUTION.............................. 18
USE OF PROCEEDS....................... 19
CAPITALIZATION........................ 20
SELECTED FINANCIAL DATA............... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 22
BUSINESS.............................. 30
MANAGEMENT............................ 45
PRINCIPAL AND SELLING STOCKHOLDERS.... 57
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................ 58
DESCRIPTION OF CAPITAL STOCK.......... 62
SHARES ELIGIBLE FOR FUTURE SALE....... 67
MATERIAL UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S.
HOLDERS............................. 69
UNDERWRITING.......................... 72
NOTICE TO CANADIAN RESIDENTS.......... 75
LEGAL MATTERS......................... 76
EXPERTS............................... 76
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 76
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

------------------

YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY BE ACCURATE ONLY
ON THE DATE OF THIS PROSPECTUS.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALER'S OBLIGATIONS TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO ITS ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 6

SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should carefully read the entire prospectus, including the information under
"Risk Factors" and the Financial Statements and the notes thereto, before making
an investment decision. Unless otherwise indicated, all information contained in
this prospectus assumes that there will be no exercise of the over-allotment
option.

THE COMPANY

We are the world leader in the development of high quality, natural
graphite-based products, with more patents relative to flexible graphite than
any other company in the world. We also are one of the largest manufacturers of
flexible graphite. We provide our customers with individually designed solutions
and products for use in diverse applications in a wide range of industries. We
are building on our 37-year history of developing innovative products for
automotive and industrial sealing applications to capitalize on the
commercialization of fuel cells and to expand into other markets.

AUTOMOTIVE AND INDUSTRIAL SEALING BUSINESS. We are one of the world's
largest suppliers of flexible graphite for use in automotive, chemical and
petrochemical sealing applications, with state-of-the-art operations, advanced
technological development programs, and experienced management. Our flexible
graphite is used in:

- engine head and exhaust manifold gaskets, as well as heat shields around
engine compartments and exhaust systems,

- gaskets for valve and pipe flanges, and

- valve packings.

Products sold for these applications accounted for about 86% of our net
sales in 1999 and about 85% of our net sales in the quarter ended March 31,
2000.

This business has historically generated positive cash flow from operations
sufficient to fund our ongoing operations and development activities. We believe
that, as we introduce new products for automotive, chemical and petrochemical
applications, we will experience growth in this business over the long term. We
believe that we are well positioned to capitalize on the opportunities described
below.

FUEL CELL OPPORTUNITIES. We have been working with Ballard Power Systems
Inc. since 1992 on developing advanced flexible graphite products for use as
components in Ballard's fuel cells. A fuel cell is a power generator that
produces electricity from hydrogen and oxygen, without combustion, giving off
heat and water as the primary by-products. Our products are essential components
of Ballard(R) fuel cells that are currently targeted or have potential for use
in the following applications:

- replacements for internal combustion engines in buses, automobiles and
trucks, and

- portable power generators for equipment, including household appliances
and electronic devices, located in places without easy access to other
sources of electricity.

We believe that Ballard will also incorporate our products into fuel cells
targeted for other applications, although it is not required to do so.

We believe that Ballard is the world leader in developing zero-emission
fuel cells known as proton exchange membrane, or PEM, fuel cells. Although PEM
fuel cells are not currently commercially available, five major automobile
companies have developed prototype vehicles using Ballard PEM fuel cell
technology.

3
<PAGE> 7

In 1999, we entered into a nine-year requirements contract, renewable
annually after the initial expiration date, to supply Ballard with our products
for use in flow field plates, an integral component of fuel cells. While Ballard
has no obligation to buy any quantity of our products, the contract obligates
Ballard to buy from us any flexible graphite material used in its production of
flow field plates. It also restricts our sales of these materials to others for
use in flow field plates. In 1999, we also entered into a three-year
collaboration agreement, renewable annually after the initial expiration date,
pursuant to which, we and Ballard agreed to coordinate our respective research
and development efforts to produce flow field plates that will help to advance
the commercialization of fuel cells. We believe that the fuel cell applications
for our products represent a significant long-term growth opportunity for us.

EMERGING OPPORTUNITIES. We are leveraging technologies developed in our
work with Ballard and in our independent research and development efforts to
generate new opportunities in:

- thermal management applications for computers and other electronic
devices,

- fire protection applications in construction and building materials,

- energy management applications in devices such as batteries and
supercapacitors, and

- heat management applications in high temperature industrial furnaces.

We believe that our solutions and products will create new applications and
replace existing technologies due to superior performance and
cost-competitiveness, presenting us with growth opportunities. We believe that
our net sales of products for these emerging applications will grow more quickly
than for existing sealing applications.

OUR STRENGTHS. We have developed technological and operating strengths
that we believe give us a competitive advantage. These include:

- our history of product and solution innovation,

- our nine-year requirements contract with Ballard,

- our technological and manufacturing excellence,

- our research and development,

- our intellectual property, and

- our strong customer relationships.

OUR BUSINESS STRATEGIES. As a global, technology driven company, we intend
to pursue the development and commercialization of advanced natural
graphite-based products using the following strategies:

- capitalize on our relationship with Ballard in order to participate in
the commercialization of its fuel cell technology,

- innovate through research and development,

- identify and develop growth opportunities and increase market awareness
of our products by demonstrating product capability and performance that
exceed our customers' expectations,

- pursue strategic alliances that we believe will enhance and complement
our existing businesses and accelerate growth opportunities across a wide
range of markets, and

- aggressively protect our intellectual property through patents and
carefully maintained trade secrets.

------------------

4
<PAGE> 8

Our business was founded in 1963, and became an unincorporated operating
division of the U.S. operating subsidiary, UCAR Carbon Company Inc., of our
parent company, UCAR International Inc., in 1989. We are a Delaware corporation
that was formed in August 1999. In December 1999 and January 2000, UCAR
transferred to us its worldwide natural graphite-based products business,
including all material related assets and liabilities. We are headquartered at
11709 Madison Avenue, Lakewood, Ohio 44107. The main telephone number of our
headquarters is (216) 529-3777. We maintain a web site at
http://www.graftech.com. Information contained on our web site is not part of
this prospectus.

Graftech, the GRAFTECH logo, GRAFOIL(R), GRAFCELL(TM), GRAFSHIELD(TM),
GRAFGUARD(R), GRAFOAM(TM), GRAFKOTE(R), ADVANCED MULTIWRAP(TM), EXPANDOGRAF(R)
and SUPER GTO(TM) are our trademarks and trade names. This prospectus also
contains trademarks and trade names belonging to other parties.

5
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by us................... 650,000 shares
Common stock offered by UCAR................. 4,600,000 shares
Total................................... 5,250,000 shares
Common stock to be outstanding after this
offering................................... 30,500,000 shares
Use of proceeds.............................. To purchase and finance manufacturing
equipment, to fund working capital, and for
general corporate purposes. We will not
receive any proceeds from the sale of shares
by UCAR.
Proposed Nasdaq National Market symbol....... "GRAF"
Risk factors................................. Investment in our common stock poses risks.
You should evaluate the matters set forth
under "Risk Factors" before purchasing any
shares.
</TABLE>

The number of shares of our common stock that will be outstanding after
this offering excludes 4,600,000 shares reserved for issuance under our Employee
Equity Incentive Plan and 400,000 shares reserved for issuance under our Outside
Director Equity Incentive Plan, under which an aggregate of 293,150 shares are
subject to options that become effective on the date of this prospectus at an
exercise price equal to the initial public offering price. In some
circumstances, the number of shares reserved for issuance under these plans will
automatically increase by the number of shares issued on exercise of options
issued under these plans.

The number of shares that will be outstanding also excludes shares reserved
for issuance pursuant to antidilution provisions of stock options issued by UCAR
on or before the date of this prospectus, which provisions would become
applicable only in the event of a distribution by UCAR of shares of our common
stock held by it to its stockholders at a time when UCAR owns a majority of the
then outstanding shares of our common stock. Based on the assumptions set forth
under "Certain Relationships and Related Transactions" on page 61, the number of
shares of our common stock that could become issuable pursuant to antidilution
provisions would be about 3,337,566 shares, subject to adjustment to reflect
stock options issued by UCAR or exercised or forfeited by employees in the
ordinary course after March 31, 2000 and prior to the effective date of the
registration statement of which this prospectus is a part. About 7.5% of UCAR's
outstanding options are held by our employees.

6
<PAGE> 10

SUMMARY FINANCIAL DATA

The following summary financial data at December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 have been
derived from our audited Financial Statements appearing elsewhere in this
prospectus. The following summary financial data at December 31, 1995, 1996 and
1997 and for each of the years in the two-year period ended December 31, 1996
have not been audited. The following summary financial data at March 31, 1999
and 2000 and for the three months ended March 31, 1999 and 2000, have not been
audited, but, in the opinion of management, include all material adjustments
(consisting only of normal, recurring accruals) necessary for a fair
presentation of our financial condition and results of operations for such
periods in accordance with generally accepted accounting principles. All of the
following summary financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the notes thereto appearing
elsewhere in this prospectus.

Because we historically were a division of UCAR, the historical financial
information may not be indicative of our future performance and does not
necessarily reflect what our financial condition and results of operations would
have been had we operated as a separate, stand-alone entity during the periods
presented.

<TABLE>
<CAPTION>
FOR THREE MONTHS
FOR YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED) (UNAUDITED)
STATEMENT OF ------------------------- -------------------------
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $ 34,020 $ 36,448 $ 37,680 $ 37,589 $ 33,782 $ 8,778 $ 9,500
Gross profit.......... 13,333 14,331 15,580 15,658 12,345 3,348 3,311
Research and
development......... 613 782 1,012 1,326 1,534 384 446
Selling,
administrative and
other expenses...... 3,668 3,500 3,720 3,462 4,680 1,180 1,268
Operating profit...... 9,048 9,372 10,632 10,970 6,099 1,771 1,585
Net income............ 5,324 5,514 6,258 6,459 3,583 1,041 935
NET INCOME PER SHARE:
Basic............. 0.18 0.18 0.21 0.22 0.12 0.03 0.03
Diluted........... 0.18 0.18 0.21 0.22 0.12 0.03 0.03
WEIGHTED AVERAGE
SHARES OUTSTANDING:
Basic............. 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000
Diluted........... 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000
<CAPTION>
BALANCE SHEET DATA (UNAUDITED) (UNAUDITED)
(AT PERIOD END): --------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash.................. $ 129 $ 0 $ 0 $ 152 $ 18 $ 224 $ 28
Total assets.......... 19,822 23,768 24,094 23,199 24,171 24,846 26,673
Total debt............ 0 0 0 0 0 0 0
Stockholder's
equity.............. 9,229 13,494 11,443 10,406 12,476 16,436 13,591
OTHER DATA:
Gross profit margin... 39.2% 39.3% 41.3% 41.7% 36.5% 38.1% 34.9%
Capital
expenditures........ $ 1,296 $ 4,588 $ 1,825 $ 1,005 $ 2,326 $ 499 $ 611
</TABLE>

7
<PAGE> 11

RISK FACTORS

You should carefully consider the following risks and all other information
contained in this prospectus before purchasing our common stock. If any of the
following risks occur, our business, prospects, results of operations or
financial condition could be harmed. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.

FACTORS AFFECTING OUR COMPANY AND INDUSTRY

THE WIDESPREAD USE OF FUEL CELL SYSTEMS IN THE TRANSPORTATION AND PORTABLE
POWER MARKETS MAY NEVER DEVELOP OR MAY TAKE LONGER TO DEVELOP THAN WE
ANTICIPATE. AS A RESULT, WE MAY NOT GENERATE NET SALES OF PRODUCTS SOLD FOR USE
IN FUEL CELLS IN THE AMOUNTS OR WITHIN THE TIME FRAME WE EXPECT.

Our growth plans and future revenues depend on the development of a mass
market for fuel cells and fuel cell systems in the transportation and portable
power markets. Fuel cells and fuel cell systems represent an emerging
technology, and we do not know whether end-users will want to use them. The
development of a mass market for fuel cells and fuel cell systems may be
affected by many factors, some of which are out of our control, including:

- the possibility that fuel cells will be subject to future state and
federal regulations,

- the emergence of alternative power generation technologies,

- the future cost and availability of hydrogen and other fuels used in fuel
cell systems,

- the failure to develop a commercially viable fuel storage system,

- the lack of, or slow development of, a fuel delivery system
infrastructure,

- consumer perceptions about the safety of fuel cells and fuel cell
systems,

- changes in environmental laws and regulations that call for less
stringent or alternative emissions requirements than currently
legislated, and

- potential consumer reluctance to try new products.

If a mass market fails to develop or takes longer to develop than we
anticipate, we may be unable to recover the costs we will have incurred to
develop our products for use in fuel cells, and may not be profitable.

EVEN IF A MARKET FOR FUEL CELLS DEVELOPS, WE CANNOT ASSURE YOU THAT
BALLARD'S FUEL CELLS WILL BECOME WIDELY USED AND THEREFORE OUR NET SALES AND
ANTICIPATED REVENUE GROWTH MAY NOT BE REALIZED WITHIN THE TIME FRAME WE EXPECT
OR AT ALL.

Our business growth is dependent on Ballard's commitment to develop, market
and produce a competitive product. During the course of the requirements
contract, we will be unable to sell our products for use in fuel cells to other
manufacturers for uses covered by the contract. Moreover, some car companies
that have used Ballard(R) fuel cells to power prototype vehicles are developing
their own proton exchange membrane fuel cells or fuel cell systems. If fuel
cells or fuel cell systems developed by these car companies become widely used
instead of those developed by Ballard, we will be prohibited from selling fuel
cell technology covered under the contract to those companies, which could
affect our growth potential and revenues.

In addition, Ballard may never complete the development of a commercially
viable fuel cell or fuel cell system. Ballard may have difficulty in
implementing its technology or may decide not to pursue the development of fuel
cell technology at all. Ballard may also be unable to produce proton exchange
membrane fuel cell systems that are competitive with other technologies in terms
of price, reliability and longevity. If Ballard is unable or unwilling to
commercialize a reliable and cost-effective fuel cell, we may be unable to
market our products for use in flow field plates to other fuel cell producers or
recover the costs we will have incurred to develop our products for Ballard.

8
<PAGE> 12

BALLARD IS NOT OBLIGATED TO PURCHASE ANY SPECIFIC QUANTITY OF OUR PRODUCTS
UNDER ITS REQUIREMENTS CONTRACT WITH US. IF BALLARD FAILS TO PURCHASE OUR
PRODUCTS, OUR NET SALES AND ANTICIPATED REVENUE GROWTH MAY NOT BE REALIZED
WITHIN THE TIME FRAME WE EXPECT OR AT ALL.

Our net sales and revenue growth depend heavily on our relationship with
Ballard. Ballard's requirements contract with us does not obligate Ballard to
purchase a specific quantity of our products for use in its fuel cell
production. Even if Ballard does not purchase any of these products while the
requirements contract is in effect, under the terms of this contract we may not
be able to market these products to other manufacturers. If Ballard fails to
purchase our products or purchases our products in quantities below our
expectations, our net sales will not grow and our revenues will suffer.

BALLARD MAY DEVELOP, MANUFACTURE AND MARKET FUEL CELLS WHICH DO NOT
INCORPORATE NATURAL GRAPHITE-BASED PRODUCTS RESULTING IN REDUCED GROWTH IN OUR
BUSINESS.

Under the requirements contract, Ballard is obligated to purchase all
natural graphite-based products it uses from us. It is possible that the
advanced flexible graphite products that we provide Ballard will not continue to
meet the technical requirements of Ballard's fuel cells or will be replaced with
alternative materials or products. If we are unable to meet Ballard's needs or
one of our competitors is better able to meet those needs, our relationship with
Ballard could suffer. The loss of Ballard as a customer could negatively affect
our prospects and results of operations because we may be unable to recover our
developments costs, and will not have revenues from sales of our products to
Ballard.

OUR GROWTH PLAN DEPENDS PRIMARILY ON INTRODUCING NEW TECHNOLOGY TO EXISTING
MARKETS. THIS TECHNOLOGY MAY NOT BECOME COMMERCIALLY ACCEPTED, IN WHICH EVENT WE
WOULD NOT ACHIEVE OUR PLANNED GROWTH.

In addition to our participation in the commercialization of fuel cells,
our growth plan depends on opportunities in:

- thermal management applications for computers and other electronic
devices,

- fire protection applications in construction and building materials,

- energy management applications in devices such as batteries and
supercapacitors, and

- heat management applications in high temperature industrial furnaces.

It is possible that we may not develop viable products or some or all of
our products may not gain commercial acceptance in some or all of these
identified markets. In such case, our revenue growth could be negatively
affected. Even if our products gain commercial acceptance in these markets, our
products could be displaced by unknown or new technologies, which could have a
negative impact on our growth plans.

OUR ABILITY TO COMPETE EFFECTIVELY DEPENDS ON PROTECTING OUR INTELLECTUAL
PROPERTY RELATING TO FUEL CELL AND OTHER EMERGING OPPORTUNITIES. OUR FAILURE TO
PROTECT OUR INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR FUTURE REVENUE
GROWTH AND PROFITABILITY.

Failure to protect our intellectual property rights may result in the loss
of the exclusive right to use our technologies. We rely on patent, trademark and
trade secret law to protect our intellectual property. The issued patents that
we have obtained to date will expire between 2004 and 2018. Some of our
intellectual property is not covered by any patent or patent application. Our
patent position is subject to complex factual and legal considerations and there
can be uncertainty as to the validity, scope and enforceability of any
particular patent. Accordingly, we cannot assure you that:

- any of the U.S. or foreign patents owned by us, or other patents that
third parties may license to us in the future, will not be invalidated,
circumvented, challenged, adjudged unenforceable or licensed to others;
or

- any of our pending or future patent applications will be issued with the
breadth of claim coverage sought by us, if at all.
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<PAGE> 13

In addition, effective patent, trademark and trade secret protection may be
unavailable, limited or not applied for in some foreign countries in which we
operate.

Our ability to maintain our proprietary intellectual property may be
achieved in part by prosecuting claims against others who we believe are
infringing upon our rights and by defending against claims of intellectual
property infringement brought by others. Our involvement in intellectual
property litigation could result in significant expense to us, adversely
affecting the development of sales of the challenged material or product and
diverting the efforts of our technical and management personnel, regardless of
the outcome of such litigation.

We also seek to protect our proprietary intellectual property, including
intellectual property that may not be patented or patentable, in part by
confidentiality agreements and, if applicable, inventors' rights agreements with
our strategic partners and employees. We cannot assure you that these agreements
will not be breached, that we will have adequate remedies for any breach or that
such persons or institutions will not assert rights to intellectual property
arising out of these relationships.

If necessary or desirable, we may seek licenses under the patents or other
intellectual property rights of others. However, we can give no assurances that
we will obtain such licenses or that the terms of any offered licenses will be
acceptable to us.

The failure to obtain a license from a third party for intellectual
property we use at present could cause us to incur substantial liabilities and
to suspend the manufacture or shipment of products or our use of processes
requiring the use of such intellectual property.

TO ACHIEVE OUR GROWTH PLANS, WE WILL NEED TO SUBSTANTIALLY EXPAND OUR
MANUFACTURING CAPACITY, OPERATIONS AND BUSINESS INFRASTRUCTURE AND ATTRACT AS
WELL AS RETAIN KEY PERSONNEL. IF WE ARE UNABLE TO DO SO, WE MAY BE UNABLE TO
ACHIEVE OUR REVENUE GROWTH OR THE PROFIT MARGIN WE ANTICIPATE.

We depend on our ability to effectively manage our growth. We intend to
grow by developing new advanced flexible graphite products for customers in new
markets. We intend to increase the size of our facilities and expand the
geographic scope of our operations. We also may pursue strategic acquisitions in
the future. Our net sales could suffer if we fail to effectively manage our
growth or successfully integrate any acquired businesses. Our planned expansion
also will require a significant increase in the number of our employees. Our
future success, therefore, will depend in part on attracting and retaining
additional qualified management and technical personnel. For example, we
currently use UCAR's administrative infrastructure and related systems, which
are proprietary to UCAR. In order to successfully operate these systems, as well
as implement and operate our own information systems, we require the services of
employees with extensive knowledge of both these systems and of our business
environment. Our inability to attract and retain qualified personnel on a timely
basis, or the departure of key employees, could alter our expansion plans which
would negatively affect our results of operations.

THE AUTOMOTIVE, CHEMICAL AND PETROCHEMICAL INDUSTRIES MAY FIND SUBSTITUTES
FOR OUR FLEXIBLE GRAPHITE PRODUCTS, WHICH WOULD NEGATIVELY AFFECT OUR REVENUES
FROM OUR CURRENT BUSINESS.

Our current net sales consist almost entirely of sales of our products to
customers in the automotive, chemical and petrochemical industries. We will
continue to depend on revenues from these customers until our growth into new
markets is achieved. It is possible that our flexible graphite products could be
displaced by other technology in current markets. If customers in these markets
find an alternate product to ours, we may be unable to sustain our revenues.

IF WE LOSE OUR LARGEST CUSTOMER FOR PRODUCTS IN THE AUTOMOTIVE, CHEMICAL
AND PETROCHEMICAL INDUSTRIES OR THIS CUSTOMER SIGNIFICANTLY REDUCES ITS
PURCHASES, OUR REVENUES WOULD SUFFER.

In the past three years, Federal Mogul Corporation has purchased our two
largest customers in the automotive, chemical and petrochemical industries. As a
result, Federal Mogul has become our largest customer in this area, with 32% of
our net sales in 1999. If Federal Mogul were to significantly reduce its
purchases from us or stop buying from us entirely, our revenues would suffer.

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<PAGE> 14

OUR BUSINESS DEPENDS ON THE CONTINUED AVAILABILITY OF RAW MATERIALS AND
ENERGY SUPPLIES AT REASONABLE PRICES.

We purchase our raw materials and energy from a variety of sources. We
currently have no long-term purchase contracts with respect to any raw materials
or energy. We depend on the continued availability of raw materials at
reasonable prices. Our business may suffer if there is a substantial increase in
raw materials or energy prices which cannot be mitigated or passed on to our
customers or if there is a prolonged interruption in the supply of natural
graphite.

WE ARE SUBJECT TO RIGOROUS COMPETITION IN OUR AUTOMOTIVE, CHEMICAL AND
PETROCHEMICAL MARKETS, AND THESE FLEXIBLE GRAPHITE SEALING APPLICATIONS MARKETS
ARE HIGHLY COMPETITIVE WITH RELATIVELY LOW BARRIERS TO ENTRY BY ADDITIONAL
COMPETITORS.

The flexible graphite business is highly competitive. The capital
requirements to begin producing flexible graphite are relatively small. In the
markets we historically have served, competition is based primarily on price.
Some of our competitors have, and some of our future competitors may have,
greater financial, marketing and other resources than we do. In 1999, we reduced
the average price of our flexible graphite products to match price decreases by
our primary competitors in an effort to maintain market share. Our business,
results of operations and financial condition could be materially adversely
affected if competition prevents us from maintaining or increasing prices,
volumes or net sales, or requires significant increases in spending on research
and development, marketing or sales and customer service.

HEALTH AND ENVIRONMENTAL COMPLIANCE COSTS AND LIABILITIES RELATING TO OUR
MANUFACTURING OPERATIONS COULD ADVERSELY AFFECT OUR PROFITABILITY OR FINANCIAL
CONDITION.

Our operations and properties are subject to increasingly stringent laws
and regulations relating to health and environmental protection, including laws
and regulations governing air emissions, water discharges, waste management and
workplace safety. These laws and regulations can impose substantial fines and
criminal sanctions for violations and require the installation of costly
pollution control equipment or operational changes to limit pollution emissions
and decrease the likelihood of accidental injuries or hazardous substance
releases. We incur, and expect to continue to incur, capital and operating costs
to comply with these laws and regulations. We incurred about $1.74 million in
expenditures related to protecting the environment in 1998 and about $1.85
million in 1999, and we project expenditures related to protecting the
environment to be about $2.7 million in 2000 and about $2.9 million in 2001.

We use and generate hazardous substances and wastes in our manufacturing
operations. In addition, the properties on which we operate are and have been
used for industrial purposes. Accordingly, we may become subject to potentially
material liabilities relating to the investigation and cleanup of contaminated
properties, and to claims alleging personal injury or property damage as the
result of exposures to, or releases of, hazardous substances. As of January 1,
2000, we assumed all liabilities relating to the natural, acid-treated and
flexible graphite business of UCAR. As a result, we could be required to clean
up contamination or otherwise become subject to liability due to the prior
operation of the natural, acid-treated and flexible graphite business. In
addition, stricter enforcement of existing laws and regulations, new laws and
regulations, discovery of previously unknown contamination or imposition of new
or increased requirements could require us to incur costs or become the basis of
new or increased liabilities that could have a material adverse effect on our
business, financial condition or results of operations.

RISKS RELATED TO OUR RELATIONSHIP WITH UCAR

UCAR WILL CONTROL US FOLLOWING THIS OFFERING. AS LONG AS UCAR OWNS A
MAJORITY OF OUR OUTSTANDING COMMON STOCK, INVESTORS IN THIS OFFERING AND OTHER
STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF ANY STOCKHOLDER VOTE.

Following this offering, we will continue to be a subsidiary of UCAR, which
will own about 82.8% of our common stock outstanding after this offering, or
about 80.2% if the underwriters exercise in full their over-allotment option. As
long as UCAR owns a majority of our outstanding common stock, UCAR will be able
to control the outcome of all stockholder votes, including election of all
directors and removal of
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<PAGE> 15

any director, with or without cause. UCAR will also be able, by written consent
and without a meeting of stockholders, to take any action which the stockholders
could take. Investors in this offering will not be able to affect the outcome of
any stockholder vote. As a result, UCAR will have the ability to control all
matters affecting us, including:

- through its ability to elect and remove directors, determining our
business strategies and policies, including appointment and removal of
officers,

- identifying and allocating business opportunities that may be suitable
for us and UCAR,

- our participation in mergers or other business combinations,

- our acquisition or disposition of assets,

- our financing,

- any change to the agreements between us and UCAR and assertion of any
claims against UCAR,

- any payment of dividends on our common stock, and

- determinations with respect to our tax returns.

We have entered into a stockholder's agreement with UCAR that provides to
UCAR registration rights, stock issuance approval, major transaction approval,
preemptive, director nomination and other rights so long as UCAR owns at least
20% of our outstanding common stock.

UCAR is not prohibited from selling or distributing a controlling interest
in us in one transaction to a third party or in one or more transactions to the
public or third parties.

UCAR WILL HAVE THE RIGHT TO MAINTAIN ITS CONTROLLING INTEREST IN OUR
COMPANY EVEN IF WE SELL ADDITIONAL SHARES OF OUR COMMON STOCK.

Under the terms of a stockholder's agreement with UCAR, if we issue
additional equity, other than in pro rata issuances to all stockholders and
other than non-qualified stock options that generally do not vest within three
years after the date of this prospectus, UCAR will have the right to purchase
(on the same terms as the issuance giving rise to these purchase rights) that
number of shares of our common stock as would allow it to maintain the same
proportional ownership interest in us that it had prior to the issuance. If UCAR
exercises this right, UCAR will be able to maintain its control over us
indefinitely.

UCAR MAY COMPETE AGAINST US OR TAKE CORPORATE OPPORTUNITIES WHICH COULD BE
VALUABLE TO US. IF UCAR BECOMES A COMPETITOR, OUR NET SALES AND REVENUE GROWTH
MAY SUFFER.

Our business constitutes virtually all of UCAR's current flexible graphite
business and substantially all of its natural graphite-based business
activities. UCAR's other graphite businesses are petroleum coke-based and do not
currently compete with our business in any material respect. Nonetheless, UCAR
may use natural graphite in some of its other non-flexible graphite products,
and may seek to expand such use to enhance those other products and broaden the
product lines of its other businesses. Further, those other businesses may
develop products, or acquire businesses or companies whose products are
competitive with our products, in the future. Moreover, it is possible that
applications for UCAR's non-flexible graphite products could be developed which
would make them competitive with our products. There are no agreements that
require UCAR to turn over to us any acquisition, product development or other
corporate opportunities which relate or could relate to our business. Moreover,
our Certificate of Incorporation provides that no transaction or agreement
relating to competition, corporate opportunities or other matters with UCAR
shall be void or voidable or constitute a breach of fiduciary duty if approved
by disinterested directors, officers or employees or is otherwise fair. If UCAR
successfully competes with us, this could negatively impact our operations and
net sales.

IF DIRECTORS, EXECUTIVE OFFICERS OR INDIVIDUALS PROVIDING IMPORTANT
SERVICES TO US HAVE OR DEVELOP CONFLICTS OF INTEREST, THIS COULD ADVERSELY
AFFECT DECISIONS THESE DIRECTORS, OFFICERS OR INDIVIDUALS MAKE
FOR US.

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<PAGE> 16

Many of our directors and executive officers have substantial investments
in UCAR common stock and have options to purchase UCAR common stock. Further,
some of our directors are also directors of UCAR and some of the individuals who
will provide transitional services to us will continue to be employees of UCAR.
These relationships potentially could create, or appear to create, conflicts of
interest when directors or employees are faced with decisions that could have
different implications for UCAR and us. If there are decisions regarding UCAR
and us, they may make decisions more favorable to UCAR than they would if a
third party were involved. The provisions in our Certificate of Incorporation,
as described in the risk factor immediately preceding this one relating to
transactions and agreements with UCAR, also apply to decisions and activities of
these directors, officers and individuals.

Conflicts of interest may arise between UCAR and us in a number of areas
relating to our past and ongoing relationships, including:

- labor, tax, employee benefit, indemnification and other matters arising
from any separation of us from UCAR,

- intellectual property matters,

- employee retention and recruiting,

- sales or distributions by UCAR of all or any portion of its ownership
interest in us,

- the nature, quality and pricing of transitional services UCAR has agreed
to provide us, and

- business opportunities that may be attractive to both UCAR and us.

While we are controlled by UCAR, UCAR may be able to require us to agree to
amendments to these agreements that may be less favorable to us than the current
terms of these agreements.

WE HAVE NOT OPERATED AS A STAND-ALONE ENTITY. OUR HISTORICAL FINANCIAL
INFORMATION MAY NOT BE REPRESENTATIVE OF OUR FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR CASH FLOW AS A SEPARATE STAND-ALONE ENTITY.

Our Financial Statements have been derived from the consolidated financial
statements of UCAR using the historical results of operations and historical
bases of the assets and liabilities of UCAR's business that we comprise. UCAR
did not account for us, and we were not operated, as a separate, stand-alone
entity for the periods presented. Our costs and expenses include allocations
from UCAR for centralized corporate services and infrastructure costs,
including:

<TABLE>
<S> <C>
- legal, - research and development,
- accounting, - sales,

- treasury, - marketing, and

- real estate, - engineering.

- information technology,
</TABLE>

Accordingly, the historical financial information that we have included in
this prospectus does not necessarily reflect what our financial condition,
results of operations and cash flows would have been if we had been a separate
stand-alone entity at the dates and during the periods presented.

Moreover, this historical financial information is not necessarily
indicative of what our results of operations, financial condition and cash flows
will be in the future. We have not made adjustments to this historical financial
information to reflect many significant changes that may occur in our cost
structure, cash flow and operations as a result of our separation from UCAR.
These changes include increased costs associated with reduced economies of
scale, increased marketing expenses related to building a company brand identity
separate from UCAR, and increased costs associated with being a publicly traded,
stand-alone company.

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<PAGE> 17

AS A STAND-ALONE ENTITY, WE WILL NOT BE ABLE TO RELY ON UCAR TO FUND OUR
FUTURE CAPITAL REQUIREMENTS, AND FINANCING FROM OTHER SOURCES, IF NEEDED, MAY
NOT BE AVAILABLE ON FAVORABLE TERMS OR AT ALL.

After this offering, UCAR will not be required and does not intend to
provide funding for our working capital or other cash requirements. We believe
that our capital requirements will vary from quarter to quarter, depending on
factors such as capital expenditures, fluctuations in our results of operations,
acquisitions and changes in working capital due to fluctuations in inventory
levels, receivables collections and payables management. We may require or
choose to obtain additional debt or equity financing in order to fund
acquisitions, capital expenditures or other activities. Pursuant to a
stockholder's agreement with UCAR, we must obtain UCAR's consent to any such
financing. Future equity financings would be dilutive to the holders of our
common stock then outstanding. Future debt financings could involve restrictive
covenants that would limit our operating flexibility. We may not be able to
obtain adequate financing at favorable prices or interest rates and other terms,
or at all. If adequate financing is not available or is only available on
unfavorable terms, we may be unable to maintain or expand our business, take
advantage of future opportunities or respond to competitive pressures. This
could have a material adverse effect on our business, results of operations or
financial condition.

IF THE TRANSITIONAL SERVICES BEING PROVIDED TO US BY UCAR ARE NOT
SUFFICIENT TO MEET OUR NEEDS OR IF WE ARE NOT ABLE TO REPLACE THESE SERVICES
AFTER OUR AGREEMENTS WITH UCAR TERMINATE, WE MAY BE UNABLE TO MANAGE OUR
BUSINESS.

We currently use UCAR's administrative infrastructure, and our ability to
satisfy our customers and operate our business will suffer if we do not develop
our own infrastructure quickly and cost-effectively. UCAR is currently providing
transitional services related to such matters as:

- information technology systems,

- human resources administration,

- payroll and other internal computing operations,

- intellectual property matters, and

- legal, finance, tax and accounting matters.

Although UCAR has agreed to provide us these transitional services, these
services may not be provided at the same level as when we were wholly owned by
UCAR. The agreements relating to these services have varying terms that may be
renewed at the expiration of the term unless terminated by either party at the
end of such term. We may not be able to replace these services on terms and
conditions, including cost, as favorable as those we expect to receive from
UCAR.

Many of these services relate to systems that are proprietary to UCAR and
are very complex. These systems have been modified, and are in the process of
being further modified, to enable us to separately track items related to our
business. These modifications, however, may result in unexpected system failures
or the loss or corruption of data.

We also are in the process of creating our own systems to replace UCAR's
systems. We may not be successful in implementing these systems and
transitioning data from UCAR's systems to ours. Any failure or significant
downtime in UCAR's or our own systems could prevent us from taking customer
orders, shipping products or billing customers and could harm our business.

FACTORS AFFECTING THIS OFFERING

OUR STOCK PRICE MAY BE VOLATILE DUE TO THE NATURE OF OUR BUSINESS, WHICH
COULD AFFECT THE SHORT-TERM VALUE OF YOUR INVESTMENT.

The stock market in general, and the market for shares of companies
providing technological solutions in particular, has from time to time
experienced extreme price and volume fluctuations. Many factors may

14
<PAGE> 18

cause the market price for our common stock to decline or fluctuate, perhaps
substantially, following this offering, including:

- failure to meet product development and commercialization goals,

- quarterly variations in our operating results,

- net sales and results of operations failing to meet the expectations of
securities analysts or investors,

- downward revisions in securities analysts' revenue or earnings estimates
or changes in general market conditions,

- technological innovations or strategic actions by our competitors,

- speculation in the press or investor perception of our industry or our
prospects,

- general technology or domestic and economic factors unrelated to our
performance, or

- actions by or events or circumstances relating to UCAR.

The stock markets in general have experienced extreme volatility that has
often been unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the market price of our common
stock.

In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
could be involved in a securities class action litigation in the future. Such
litigation could result in substantial costs and a diversion of management's
attention and resources.

YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION AND YOU MAY NOT BE ABLE
TO SELL OUR STOCK AT A PRICE HIGHER THAN THE INITIAL PUBLIC OFFERING PRICE OR AT
ALL.

The initial public offering price per share will be substantially higher
than the net tangible book value per share immediately after this offering. If
you purchase shares in this offering, at an initial public offering price of
$16.50 per share (the midpoint of the estimated price range on the cover of this
prospectus), you will incur dilution of approximately $15.72 per share from the
price per share you paid based on a pro forma as adjusted net tangible book
value per share of $0.78.

RIGHTS WE HAVE GRANTED IN RESPECT OF EXISTING UCAR STOCK OPTIONS MAY RESULT
IN THE ISSUANCE OF A SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK, WHICH MAY
RESULT IN A SUBSTANTIAL DILUTION OF YOUR OWNERSHIP INTEREST.

Pursuant to a stockholder's agreement with UCAR and our Employee Equity
Incentive Plan, we have agreed to issue options to purchase our common stock to
holders of options to purchase shares of UCAR's common stock if UCAR:

- owns at least a majority of our common stock, and

- elects to distribute its shares of our common stock to its stockholders.

We have reserved an indeterminate number of shares of our common stock for
issuance in respect of these options. These shares are additional to the
4,600,000 shares reserved under our Employee Equity Incentive Plan. Based on the
assumptions set forth under "Certain Relationships and Related Transactions"
elsewhere in this prospectus, about 3,337,566 shares of our common stock would
be issuable in respect of such options and the average exercise price per new
option would be about $15.86 per share of our common stock. Based on the same
assumptions, the exercise of such options would be dilutive to purchasers of
shares of our common stock in this offering.

FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT ITS MARKET PRICE.

Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower the market price of our common stock or make it

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<PAGE> 19

difficult for us to raise additional equity financing in the future. After this
offering, we will have 30,500,000 shares of our common stock outstanding. Of
these shares, the shares sold in this offering will be freely tradeable. All of
the remaining shares are subject to 180-day lock-up agreements. All of these
remaining shares are held by UCAR, and UCAR will have the right to require us to
register these remaining shares for public sale. Accordingly, all of these
remaining shares may be available for sale in the public market 180 days after
the date of this prospectus.

In addition, after this offering, we also intend to register the 5,000,000
shares of our common stock reserved for issuance under our Employee Equity
Incentive Plan and our Outside Director Equity Incentive Plan and, if any
options are issued by us as described in the preceding risk factor, we will be
required to register the shares issuable upon exercise of those options.

We cannot predict whether future sales of our common stock, or the
availability of our common stock for future sale, will harm the market price for
our common stock or our ability to raise capital by offering equity securities.

OUR SECURITIES HAVE NO PRIOR PUBLIC MARKET, AND WE CANNOT ASSURE YOU THAT
OUR STOCK PRICE WILL NOT DECLINE OR FLUCTUATE AFTER THIS OFFERING.

Our common stock is a new issue of securities for which there is currently
no trading market. Although we expect our common stock to be quoted on The
Nasdaq National Market, an active trading market for our common stock may not
develop or be sustained following this offering. If you purchase shares in this
offering, you may not be able to resell your shares at prices equal to or
greater than the initial public offering price. The initial public offering
price will be determined through negotiations among UCAR, the underwriters and
us, and may not be indicative of the market price for our common stock following
this offering.

SOME PROVISIONS OF DELAWARE LAW AND OUR CHARTER, BYLAWS AND AGREEMENTS WITH
UCAR MAY MAKE A TAKEOVER OF US MORE DIFFICULT. THIS MAY ADVERSELY AFFECT THE
MARKET PRICE FOR OUR COMMON STOCK.

Although we are not at this time subject to the antitakeover provisions of
Section 203 of the Delaware General Corporation Law, our Certificate of
Incorporation provides that, if UCAR ceases to own at least a majority of our
common stock, we will be subject to Section 203. Section 203 could discourage,
delay or prevent a third party from acquiring control of us. In addition,
provisions of our Certificate of Incorporation, Bylaws and agreements with UCAR
may have the effect of discouraging, delaying or preventing a third party from
acquiring control of us, even if such transaction would be beneficial to our
stockholders. In addition, our Board of Directors intends to adopt a stockholder
rights plan which may have the same effect. Neither these provisions nor our
stockholder rights plan will apply to transactions involving UCAR.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements that reflect our
current estimates, expectations and projections about our future results,
performance, prospects and opportunities. In some cases, you can identify these
statements by forward-looking words such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may", "should", "will", "would" and similar
expressions. These forward-looking statements are based on information currently
available to us and are subject to a number of risks, uncertainties and other
factors that could cause our actual results, performance, prospects or
opportunities to differ materially from those expressed in, or implied by, these
forward-looking statements. These risks, uncertainties and other factors include
matters related to:

- the future of our business, technologies, products or activities,

- the future markets for our products,

- our growth, results of operations or financial position in the future,
and

- other factors set forth under "Risk Factors" in this prospectus.
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<PAGE> 20

You should not place undue reliance on any forward-looking statements.
Except as otherwise required by federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any
other reason after the date of this prospectus.

DIVIDEND POLICY

It is our current policy to retain earnings to finance the further
expansion and continued growth of our business. We do not, therefore, intend to
pay any cash dividends on our common stock for the foreseeable future. Any
future determination regarding the payment of dividends will be within the sole
discretion of our Board of Directors and will depend upon, among other things,
our earnings, results of operations, financial condition, current and
anticipated cash needs, and restrictions under any future loan, credit,
stockholder or other agreement to which we may become a party. Our stockholder's
agreement with UCAR also prohibits us from declaring dividends or making
distributions on our securities without its consent. No other agreement governs
our payment of dividends at this time. We expect to enter into a credit facility
which we expect will contain customary restrictions on payments of dividends.

We currently do not have any subsidiaries. On or prior to December 31,
2000, we intend to create a holding company structure pursuant to which we will
become the parent holding company. Our Board of Directors and sole stockholder
have approved proceeding with the creation of this structure. Therefore, after
this structure is created, we will derive all of our cash flow from our
subsidiaries. Consequently, following such restructuring our ability to pay cash
dividends will be dependent upon the earnings of our subsidiaries and the
distribution of those earnings to us. The distributions of those earnings will
be subject to restrictions under applicable corporate laws and any future loan,
credit or other agreement to which we or our subsidiaries may become a party.

17
<PAGE> 21

DILUTION

Dilution is the amount by which the initial public offering price paid by
the purchasers of our common stock in this offering will exceed the net tangible
book value per share of our common stock after this offering. The net tangible
book value per share of our common stock is determined by subtracting our total
liabilities from the total book value of our tangible assets and dividing the
difference by the number of shares of our common stock deemed to be outstanding
on the date as of which the book value is determined.

At March 31, 2000, we had net tangible book value of $13.6 million and net
tangible book value per share of $0.46. Assuming that the sale of the shares in
this offering had occurred on March 31, 2000 at an initial public offering price
of $16.50 per share (which is the mid-point of the estimated price range on the
cover of this prospectus) and after deducting the underwriting discounts and
estimated offering expenses payable by us, our net tangible book value at March
31, 2000 would have been about $23.4 million or $0.78 per share. This represents
an immediate increase in net tangible book value of $0.32 per share held by
UCAR. Immediate dilution to the purchasers of our common stock in this offering
would have been as set forth in the following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $16.50
Net tangible book value at March 31, 2000................. $ 0.46
Increase attributable to purchase of shares in this
offering............................................... 0.32
Net tangible book value per share after this offering....... 0.78
------
Dilution per share to purchasers of shares in this
offering.................................................. $15.72
======
</TABLE>

The discussion and table above assume no issuance of shares reserved for
future issuance under our Employee Equity Incentive Stock Plan and our Outside
Director Equity Incentive Plan or shares reserved for issuance pursuant to
antidilution provisions of stock options issued by UCAR. Options to purchase
293,150 shares of our common stock become effective on the date of this
prospectus at an exercise price equal to the initial public offering price.
Options with exercise prices at or above the initial public offering price will
not cause further dilution to new investors. If UCAR distributes shares of our
common stock to its stockholders, however, we will issue additional options to
purchase shares of our common stock pursuant to antidilution provisions of stock
options issued by UCAR. Issuance of such shares may result in further dilution
to new investors, as described under "Certain Relationships and Related
Transactors" elsewhere in this prospectus.

The following table summarizes, on a pro forma basis as of March 31, 2000,
the difference between our existing stockholder and new investors with respect
to the number of shares of our common stock purchased from us, the total
consideration paid to us and the average price per share paid. Our only existing
stockholder is UCAR. The following table assumes that the initial public
offering price will be $16.50 per share. If the over-allotment option is
exercised in full, the percentage of the total number of shares of our common
stock outstanding held by UCAR will decrease from 82.8% to 80.2% of the total
number of shares of our common stock outstanding after this offering, and the
percentage of the total number of shares of our common stock outstanding held by
new investors will increase from 17.2% to 19.8% of the total number of shares of
our common stock outstanding after this offering.

<TABLE>
<CAPTION>
AGGREGATE
SHARES ACQUIRED CONSIDERATION PAID
---------------------- ----------------------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA) AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholder................. 29,850,000 97.9% $ 12.5 53.9% $ 0.42
Purchasers of shares in this
offering........................... 650,000 2.1 10.7 46.1 16.50
----------- ----- ------ -----
Total...................... 30,500,000 100.0% $ 23.2 100.0%
=========== ===== ====== =====
</TABLE>

The consideration paid by UCAR represents the amount of the book value of
the net assets contributed by UCAR to us on January 1, 2000.

18
<PAGE> 22

USE OF PROCEEDS

The net proceeds to us from the sale of the 650,000 shares of our common
stock offered by us in this offering are estimated to be about $10 million, at
an assumed initial public offering price of $16.50 per share (which is the
mid-point of the range on the cover of this prospectus) and after deducting
estimated offering expenses payable by us. We expect to share offering expenses
with UCAR, our parent company. The principal uses of the net proceeds to us from
this offering are:

- about $7.0 million to finance equipment for proprietary manufacturing
capabilities at our Parma, Ohio facility to produce products for Ballard
and other customers, installation of which began in the first quarter of
2000 and is expected to be completed in the first quarter of 2001,

- about $2.0 million to invest in the growth and expansion of our business,
including the purchase of proprietary flake treating and related
processing equipment used to make expandable and flexible graphite-based
products, and

- the balance to fund working capital and for general corporate purposes,
including other capital expenditures.

In addition, we may use a portion of the net proceeds to us from this
offering to acquire or invest in complementary businesses or technologies,
including, for example, joint ventures, strategic alliances or licensing
arrangements. We do not currently have any pending commitments or agreements to
make any such acquisitions or investments, except for a memorandum of
understanding regarding possible development of a raw material source in Canada.
Pending their use, the net proceeds to us from this offering will be invested in
short-term, investment grade, interest-bearing instruments, certificates of
deposit or direct or guaranteed obligations of the United States government.

We will not receive any of the proceeds from the sale of shares of our
common stock by UCAR, our parent company. UCAR has decided to sell shares of our
common stock to optimize management focus, streamline organizational efficiency,
tailor compensation to reflect operational performance, enhance investor
understanding of separate businesses, generate funds to pay down debt and
increase its pool of available funds to invest in its core business over the
long-term. For these and other reasons, it may decide to sell additional shares
of our common stock in the future.

We will pay our internal costs relating to the offering, underwriting
discounts and commissions on the shares issued by us, and a portion of third
party expenses based on our pro rata share of the gross proceeds in this
offering. UCAR will pay its internal costs relating to this offering,
underwriting discounts and commissions on the shares sold by it, and a portion
of third party expenses based on its pro rata share of the gross proceeds in
this offering.

19
<PAGE> 23

CAPITALIZATION

The following table sets forth our capitalization at March 31, 2000 on an
actual basis and as adjusted to reflect the sale by us of the 650,000 shares of
our common stock offered by us at an assumed initial public offering price of
$16.50 per share (which is the midpoint of the estimated price range on the
cover of this prospectus) and the initial application of the net proceeds to us
therefrom. The information set forth below is qualified by and should be read in
conjunction with the Financial Statements and the notes thereto included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash........................................................ $ 28 $ 9,841
======= =======
Debt........................................................ $ -- $ --
======= =======
Stockholder's equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized; none issued or outstanding................. $ -- $ --
Common stock, $.01 par value; 200,000,000 shares
authorized; 29,850,000 shares issued and outstanding,
actual; and 30,500,000 issued and outstanding, as
adjusted............................................... 299 305
Additional paid-in-capital................................ 12,357 22,164
Retained earnings......................................... 935 935
------- -------
Divisional equity......................................... --
Total stockholders' equity........................ 13,591 23,404
------- -------
Total capitalization......................... $13,591 $23,404
======= =======
</TABLE>

In addition, 5,000,000 shares have been reserved for issuance under our
Employee Equity Incentive Plan and our Outside Director Equity Incentive Plan,
under which an aggregate of 293,150 shares are subject to options that become
effective on the date of this prospectus, and an indeterminate number of shares
(estimated to be about 3,337,566 shares based on the assumptions described in
"Certain Relationships and Related Transactions") have been reserved for
issuance pursuant to antidilution provisions of stock options issued by UCAR.
These antidilution provisions would become applicable only if UCAR distributes
shares of our common stock held by it to its stockholders at a time when UCAR
owns a majority of our outstanding common stock.

20
<PAGE> 24

SELECTED FINANCIAL DATA

The following selected financial data at December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 have been
derived from our audited Financial Statements appearing elsewhere in this
prospectus. The following selected financial data at December 31, 1995, 1996 and
1997 and for each of the years in the two-year period ended December 31, 1996
have not been audited. The following selected financial data at March 31, 1999
and 2000 and for the three months ended March 31, 1999 and 2000 have not been
audited, but, in the opinion of management, include all material adjustments
(consisting only of normal, recurring accruals) necessary for a fair
presentation of our financial condition and results of operations for such
periods in accordance with generally accepted accounting principles. All of the
following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the notes thereto appearing
elsewhere in this prospectus.

Net sales................ $ 34,020 $ 36,448 $ 37,680 $ 37,589 $ 33,782 $ 8,778 $ 9,500
Gross profit............. 13,333 14,331 15,580 15,658 12,345 3,348 3,311
Research and
development............ 613 782 1,012 1,326 1,534 384 446
Selling, administrative
and other expenses..... 3,668 3,500 3,720 3,462 4,680 1,180 1,268
Operating profit......... 9,048 9,372 10,632 10,970 6,099 1,771 1,585
Net income............... 5,324 5,514 6,258 6,459 3,583 1,041 935
NET INCOME PER SHARE:
Basic.................. 0.18 0.18 0.21 0.22 0.12 0.03 0.03
Diluted................ 0.18 0.18 0.21 0.22 0.12 0.03 0.03
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic.................. 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000
Diluted................ 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000 29,850,000
BALANCE SHEET DATA (AT
PERIOD END): (UNAUDITED) (UNAUDITED)
------------------------------------ -----------------------
Cash..................... $ 129 $ 0 $ 0 $ 152 $ 18 $ 224 $ 28
Total assets............. 19,822 23,768 24,094 23,199 24,171 24,846 26,673
Total debt............... 0 0 0 0 0 0 0
Stockholder's equity..... 9,229 13,494 11,443 10,406 12,476 16,436 13,591
Working capital.......... 3,060 3,956 1,601 1,179 2,547 7,164 3,488
OTHER DATA:
Gross profit margin...... 39.2% 39.3% 41.3% 41.7% 36.5% 38.1% 34.9%
Capital expenditures..... $ 1,296 $ 4,588 $ 1,825 $ 1,005 $ 2,326 $ 499 $ 611
</TABLE>

21
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

At the time we founded our business in 1963, we were an unincorporated
business within the Carbon Products Division of Union Carbide Corporation.
During our early stages of operation in the 1970's, we licensed our initial
technology for the manufacture of flexible graphite to other companies that
later became producers of flexible graphite. In 1989, the Carbon Products
Division was separated from Union Carbide's other businesses and contributed to
UCAR Carbon Company Inc., a wholly-owned subsidiary of Union Carbide. UCAR
Carbon was subsequently contributed to UCAR International, which became a public
company in 1995. We remained a division of UCAR Carbon Company Inc. until
January 2000, at which time UCAR transferred substantially all of the assets and
liabilities related to its worldwide natural graphite, acid-treated and flexible
graphite business to us.

All financial information at dates and for periods prior to this offering
were prepared as if we had operated as a separate stand-alone entity at those
dates and for those periods. This includes allocated expenses which are
described further in the table on page 23.

BUSINESS BACKGROUND

About 80% of our net sales are derived from sales of our products in North
America. The balance of our net sales is derived from sales in Western Europe
and the Far East. We incur manufacturing costs and are paid for our products
primarily in United States dollars. As a result, our results of operations and
financial condition are not affected to any material extent by changes in
currency exchange rates. Since we serve markets worldwide, we are impacted in
varying degrees as local or regional conditions fluctuate, affecting demand for
our products.

Historically, our principal products have consisted of flexible graphite
sold primarily for use in gaskets and other sealing applications in the
automotive, chemical and petrochemical industries. Our business has historically
generated positive cash flow from operations sufficient to fund our ongoing
operations and development activities. Although our net sales have been
negatively impacted in 1999 by price competition, we believe that as we
introduce new products for automotive, chemical and petrochemical applications,
we will experience growth in this business over the long term.

During the past 18 months, we refocused our business strategy to
concentrate on the growth opportunities in the fuel cell and other new markets.
We have increased our research and development efforts in the fuel cell and
other new markets, and intend to continue to expand support of our efforts to
grow sales of our products in these markets.

UCAR COST ALLOCATIONS

The following table sets forth the allocations and methods for allocations
of costs from UCAR represented by some items in the Statements of Operations.
These allocations are applicable to each period covered in the Statements of
Operations, and management believes these allocations were reasonable.

Included in cost of sales were allocated costs totalling $1.8 million in
1997, $2.0 million in 1998, $2.1 million in 1999, $0.5 million in the quarter
ended March 31, 1999 and $0.6 million in the quarter ended March 31, 2000.
Included in selling, administrative and other expenses were allocated costs
totalling $1.2 million in 1997, $1.3 million in 1998, $1.5 million in 1999, $0.3
million in the quarter ended March 31, 1999 and $0.5 million in the quarter
ended March 31, 2000. All of the research and development expenses and provision
for income taxes represent allocated costs for each period, except for the first
quarter of 2000 which included allocated costs of $0.2 million for research and
development.

22
<PAGE> 26

<TABLE>
<CAPTION>
ITEM COMPONENTS METHOD OF ALLOCATION
---- -------------------------------- --------------------------------
<S> <C> <C>
Cost of sales................... Allocations for employee benefit Based primarily on headcount,
costs in our production total payroll, or on actual
workforce costs, whichever most accurately
reflects costs

Selling, administrative and
other expenses................ Allocations under the corporate For other than employee benefit
services agreement (legal, costs, allocation is based on
accounting, tax, human the actual cost of the estimated
resources, accounts receivable, portion of each service that is
accounts payable, information performed on our behalf
systems, investor relations,
treasury risk management and Allocation for employee benefit
health, safety and environmental costs is based primarily on
protection) headcount, total payroll, or on
actual costs, whichever most
accurately reflects costs

Research and development........ Rent for Parma, Ohio Product and Based on fair rental value for
Process Development Center the portion being used based on
the estimated value of the
facility, plus an allocation of
overhead costs to the extent
that they would relate to the
facility

Services provided at the Parma, Based on the actual cost of the
Ohio Product and Process estimated portion of each
Development Center, such as service that is performed on our
research, stores and services behalf
relating to site health, safety
and environmental protection

Costs for supplies used Based on actual usage

Costs for maintenance and Billed for actual hours we
testing require, with an hourly rate
based on actual historical labor
rates

Provision for income taxes...... Federal and state income taxes Based on the tax liability we
would incur if we filed a
separate return
</TABLE>

Effective January 1, 2000, we entered into a ten-year operating lease
agreement, with one five-year extension, with UCAR related to the principal
building in Lakewood, Ohio in which we operate. Payments under the lease are
$213,000 per year for the first five years of the lease term. Every five years
thereafter, the rent will be reset to fair market rental value. For periods
through December 31, 1999, our financial statements do not reflect any rent paid
on the Lakewood, Ohio facility. Instead, prior to entering into the lease
agreement, we had been allocated actual depreciation expense with respect to the
building in the amount of $8,000 for 1997, $13,000 for 1998 and $14,000 for
1999.

23
<PAGE> 27

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, some items in
the Statements of Operations and the increase or decrease (expressed as a
percentage of such item in the comparable prior period) of such items:

<TABLE>
<CAPTION>
PERCENTAGE
INCREASE
FOR THREE MONTHS (DECREASE)
ENDED -----------------------
FOR YEARS ENDED DECEMBER 31, MARCH 31, 1997 1998 Q1 1999
----------------------------- ---------------- TO TO TO
1997 1998 1999 1999 2000 1998 1999 Q1 2000
------- ------- ------- ------ ------ ---- ---- -------
(DOLLARS IN THOUSANDS) (UNAUDITED,
DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $37,680 $37,589 $33,782 $8,778 $9,500 0.2% (10.1)% 8.2%
Cost of sales............. 22,100 21,931 21,437 5,430 6,189 (0.8) (2.3) 14.0
------- ------- ------- ------ ------
Gross profit.............. 15,580 15,658 12,345 3,348 3,311 0.5 (21.2) (1.1)
Research and
development............. 1,012 1,326 1,534 384 446 31.0 15.7 16.1
Selling, administrative
and other expenses...... 3,720 3,462 4,680 1,180 1,268 (6.9) 35.2 7.5
Other expense (income),
net..................... 216 (100) 32 13 12 N/M N/M N/M
------- ------- ------- ------ ------
Operating profit.......... $10,632 $10,970 $ 6,099 $1,771 $1,585 3.2 (44.4) (10.5)
======= ======= ======= ====== ======
</TABLE>

---------------
N/M: Not Meaningful

The following table sets forth, for the periods indicated, the percentage
of net sales represented by some items in the Statements of Operations:

<TABLE>
<CAPTION>
FOR THREE MONTHS
FOR YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------- ------------------
1997 1998 1999 1999 2000
----- ----- ----- --------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 58.7 58.3 63.5 61.9 65.1
----- ----- ----- ----- -----
Gross profit..................................... 41.3 41.7 36.5 38.1 34.9
Research and development......................... 2.7 3.5 4.5 4.4 4.7
Selling, administrative and other expenses....... 9.8 9.3 13.8 13.4 13.4
Other expense (income), net...................... 0.6 (0.3) 0.1 0.1 0.1
----- ----- ----- ----- -----
Operating profit................................. 28.2% 29.2% 18.1% 20.2% 16.7%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999. Net sales in the quarter ended March 31, 2000 were $9.5 million, an
increase of $0.7 million, or 8.2%, from net sales in the quarter ended March 31,
1999 of $8.8 million. Gross profit in the quarter ended March 31, 2000 was $3.3
million, the same as gross profit in the quarter ended March 31, 1999. Gross
profit margin in the quarter ended March 31, 2000 was 34.9% of net sales as
compared to gross profit margin in the quarter ended March 31, 1999 of 38.1% of
net sales. The increase in net sales was primarily due to increased sales in
emerging markets. The positive impact of our increased sales was offset by
increased manufacturing costs resulting in gross profits remaining unchanged.

Research and development expenses were about $0.4 million in each of the
quarters ended March 31, 2000 and March 31, 1999.

Selling, administrative and other expenses increased $0.1 million, or 7.5%,
to $1.3 million in the quarter ended March 31, 2000 from $1.2 million in the
quarter ended March 31, 1999, primarily due to increases in the number of
employees to prepare for growth and increase our commercialization efforts.

24
<PAGE> 28

Operating profit was $1.6 million, or 16.7% of net sales, in the quarter
ended March 31, 2000 as compared to $1.8 million, or 20.2% of net sales, in the
quarter ended March 31, 1999. The decrease in operating profit was due to
increased selling and administrative expenses and a decreased gross margin.

Provision for income taxes was $0.7 million for both the quarter ended
March 31, 2000 and the quarter ended March 31, 1999. This is higher than the
U.S. federal income tax rate of 35%, primarily as a result of the impact of
state and local income taxes.

As a result of the changes described above, net income was $0.9 million in
the quarter ended March 31, 2000, a decrease of $0.1 million from $1.0 million
in the quarter ended March 31, 1999.

1999 COMPARED TO 1998. Net sales in 1999 were $33.8 million, a decrease of
$3.8 million, or 10.1%, from net sales in 1998 of $37.6 million. Gross profit in
1999 was $12.3 million, a decrease of $3.3 million, or 21.2%, from gross profit
in 1998 of $15.7 million. Gross profit margin in 1999 was 36.5% of net sales as
compared to gross profit margin in 1998 of 41.7% of net sales. The decrease in
net sales was primarily due to a decline in the average prices of our gasket and
sealing products. The average price of our sealing products sold to the internal
combustion market was nearly 10% lower in 1999 than in 1998. Average prices of
our other products also declined, but to a lesser extent. The volume of products
sold increased slightly in 1999 as compared to 1998. We reduced the average
price of our flexible graphite products to match price decreases by our primary
competitors in an effort to maintain market share. The majority of our price
decreases were effected early in 1999. Since the beginning of 2000, prices have
stabilized and, although there can be no assurances, we do not currently intend,
or expect to be required, to significantly decrease our prices in the near
future. Reductions in raw material costs due to lower prices, alternate sources
of supply and improvements in operations resulted in a reduction of $0.5 million
in cost of sales in 1999 as compared to 1998, even though there was a slight
increase in volume of products sold. Gross profit and gross profit margin
declined in 1999 as compared to 1998 because both the dollar amount of the
decrease and the percentage decrease in net sales exceeded both the dollar
amount of the reduction and the percentage reduction in cost of sales.

Research and development expenses increased $0.2 million, or 15.7%, to $1.5
million in 1999 from $1.3 million in 1998, reflecting our commitment of
additional personnel resources to implement our new strategic focus on fuel
cells and other emerging opportunities such as thermal management and fire
protection applications. This increase was caused by the hiring of additional
people to support the research and development efforts of our business. We
believe that, in 2000, these expenses will continue to increase due to our
commitment to innovation and commercialization of our solutions and products.

Selling, administrative and other expenses increased $1.2 million, or
35.2%, to $4.7 million in 1999 from $3.5 million in 1998, primarily due to
increases in personnel and increased resources devoted to strategic planning and
commercialization efforts. In 1999, we added five employees involved in these
activities, which accounted for most of the increase. We believe that, in 2000,
these expenses will increase due to increased support for our commercialization
efforts.

Operating profit was $6.1 million, or 18.1% of net sales, in 1999 as
compared to $11.0 million, or 29.2% of net sales, in 1998. The decrease in
operating profit was due to lower gross profit and to higher selling,
administrative and other expenses and higher research and development expenses.

Provision for income taxes was $2.5 million for 1999 as compared to $4.5
million for 1998. During both years, the provision for income taxes reflected a
41% effective income tax rate. This is higher than the U.S. federal income tax
rate of 35%, primarily as a result of the impact of state and local income
taxes.

As a result of the changes described above, net income was $3.6 million in
1999, a decrease of $2.9 million from $6.5 million in 1998.

1998 COMPARED TO 1997. Net sales in 1998 were $37.6 million, substantially
the same as net sales in 1997 of $37.7 million. The impact of a 2% decline in
average prices of our gasket and sealing products was substantially offset by an
increase in the volume of those products sold. The volume and average prices of

25
<PAGE> 29

our other products sold, and cost of sales of all products, was relatively
stable in 1998 as compared to 1997. As a result, gross profit in 1998 was $15.7
million, substantially the same as gross profit in 1997 of $15.6 million. Gross
profit margin in 1998 was 41.7% of net sales as compared to gross profit margin
in 1997 of 41.3% of net sales.

Research and development expenses increased $0.3 million, or 31.0%, to $1.3
million in 1998 from $1.0 million in 1997. This increase was primarily due to
hiring more people to support our work with our strategic partner, Ballard.

Selling, administrative and other expenses were $3.5 million in 1998, a
reduction of $0.2 million over 1997. This was due to lower costs related to
travel, commissions, and variable compensation totaling $0.3 million. These
decreased costs offset an increase in salary expense of $0.1 million.

Operating profit was relatively stable at $11.0 million, or 29.2% of net
sales, in 1998 as compared to $10.6 million, or 28.2% of net sales, in 1997.

Provision for income taxes was $4.5 million for 1998 as compared to $4.4
million for 1997. During both years, the provision for income taxes reflected a
41% effective income tax rate. This is higher than the U.S. federal income tax
rate of 35%, primarily as a result of the impact of state and local income
taxes.

As a result of the changes described above, net income was $6.5 million in
1998, an increase of $0.2 million from $6.3 million in 1997.

LIQUIDITY AND CAPITAL RESOURCES

Since January 1, 1997, cash flow from operations has constituted our
principal source of funds. For the past five years, we have had positive annual
cash flow from operations. We are seeking to improve, among other things, our
cash flow from operations in 2000 through improvements in production scheduling,
inventory management, cash management and accounts payable and receivable
management. Improvements in cash flow from operations in 2000 resulting from
these efforts are being partially offset by the cash costs of implementing these
improvements.

We believe that our cash flow from operations, combined with the net
proceeds to us from this offering and our efforts to reduce costs, improve
efficiencies and generate growth and earnings, will enable us to implement our
business strategies and meet our obligations on a long-term basis. To the extent
that demand for our products grows substantially, we would need additional funds
to finance expansion of our manufacturing capacity. If able to do so, it is most
likely that we would seek to obtain additional funds from either borrowings or
sales of additional capital stock.

CASH FLOW PROVIDED BY OPERATING ACTIVITIES. Cash flow provided by
operations was $0.4 million in the quarter ended March 31, 2000 as compared to
cash flow used in operations of $4.4 million in the quarter ended March 31,
1999. This increase of $4.8 million was due primarily to a payment of about $4.0
million in income taxes made in the quarter ended March 31, 1999, which payment
was not repeated in the quarter ended March 31, 2000. We expect to make a tax
payment during 2000 of about $2.6 million.

Cash flow provided by operations was $3.7 million in 1999 as compared to
cash flow provided by operations of $8.6 million in 1998. This decrease of $4.9
million resulted primarily from higher use of cash for working capital of $2.1
million, lower net income of $2.9 million and increased use of cash associated
with long term assets and liabilities of $0.2 million in 1999.

Use of cash flow for working capital was $1.5 million in 1999, which was
$2.1 million more than the $0.6 million of cash flow provided by working capital
in 1998. The increased use of working capital was due primarily to an increase
in the use of cash of $2.7 million for taxes payable due to higher earnings in
1998. In addition, the cash used for inventory increased by $0.5 million due to
substantial improvements in 1998 that were not achieved in 1999. These increases
were partially offset by reduction in the use of cash of $0.8 million for
payables, a result of a change in our payment policy.

26
<PAGE> 30

CASH FLOW USED IN INVESTING ACTIVITIES. We used $0.6 million of cash flow
in investing activities during the quarter ended March 31, 2000 as compared to
$0.5 million during the quarter ended March 31, 1999. This decrease of $0.1
million was primarily due to a decrease in cash used for capital expenditures
for processing equipment.

We used $2.3 million of cash flow in investing activities during 1999 as
compared to $1.0 million during 1998. This increase of $1.3 million was
primarily due to an increase in cash used for capital expenditures. Virtually
all of our annual and quarterly investing activities consisted of capital
expenditures for manufacturing and processing equipment.

CASH FLOW USED IN FINANCING ACTIVITIES. Cash flow provided by financing
activities was $0.2 million in the quarter ended March 31, 2000 as compared to
cash flow provided by financing activities of $5.0 million in the quarter ended
March 31, 1999. The cash flow provided by financing activities in 1999
represented net changes in divisional equity.

Cash flow used in financing activities was $1.5 million in 1999 as compared
to cash used in financing activities of $7.4 million in 1998. These uses
reflected transfers of cash to UCAR.

CREDIT FACILITY. We are in the process of securing credit facilities to
enhance our liquidity. We expect that the proposed credit facilities would
consist of:

- a three-year revolving credit facility providing for maximum borrowings
of up to $10.0 million based on eligible accounts receivable and
inventory,

- a five and one-half year term loan of $5.0 million secured by all assets,
which would require semi-annual interest payments (after the first
one-half year, the loan would amortize over a five-year period), and

- a $1.0 million revolving credit subline for stand-by letters of credit.

We have received a commitment with respect to such a facility from a bank.
The commitment is subject to a number of conditions, including the bank's
receipt of satisfactory appraisals and completion of field audits, completion of
this offering and satisfactory completion of definitive documentation. We cannot
assure you that we will obtain such facility.

CASH MANAGEMENT AND DISTRIBUTIONS TO UCAR. Historically, our liquidity and
cash flow was managed by UCAR as part of the overall activities related to its
consolidated liquidity and cash management activities. These activities included
managing cash provided to us by UCAR as well as cash we generated from the
operation of our business.

Through December 31, 1999, we operated as a division of UCAR and, as such,
cash generated from the operation of our business was retained by UCAR. To the
extent that we required funds for investment, the cash was provided by UCAR.
Since January 1, 2000, net cash generated by us has been and will be retained by
us.

Pending establishment of our own banking relationships, the net cash
generated by us has been held for us by UCAR and is reflected on our balance
sheets and statements of cash flow as part of other receivables.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. This statement establishes accounting and
reporting standards for derivative instruments. This statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
do not currently utilize any derivative financial instruments.

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YEAR 2000 ISSUE

The Year 2000 issue resulted from the fact that many computer programs were
written using two rather than four digits to define the applicable year. Any
computer programs that have time-sensitive software could have recognized a date
using "00" as the year 1900 rather than the year 2000. We did not experience any
such material errors, miscalculations or failures affecting us or our critical
suppliers, service providers or customers. We estimate that we incurred an
aggregate incremental cost of about $0.2 million for internal and external
services in connection with Year 2000 issues.

COSTS RELATING TO PROTECTION OF THE ENVIRONMENT

We have been, currently are and will continue to be subject to increasingly
stringent environmental protection laws and regulations. In addition, we have an
ongoing commitment to rigorous internal environmental protection standards. The
following table sets forth summary information regarding our environmental
expenses and capital expenditures.

<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Expenses relating to environmental protection............... $2,066 $1,308 $1,446
Capital expenditures related to environmental protection.... $ 112 $ 429 $ 403
</TABLE>

Our capital expenditures for environmental protection have been for air
emission scrubbers, wastewater neutralization systems, and other equipment
installed in conjunction with capital projects for manufacturing equipment. Our
environmental protection expenses have been for materials and utilities
necessary to operate wastewater neutralization systems and air emission
scrubbers, waste disposal and other miscellaneous environmental expenditures.

We anticipate the expenses related to environmental protection to be
similar to those we incurred in 1998 and 1999. We anticipate that our
expenditures related to protecting the environment will be about $2.7 million in
2000 and about $2.9 million in 2001. Our increased estimate for environmental
protection expenses in 2001 is due to our anticipated increase in production
volume for that year. We believe that our expenditures related to protecting the
environment will not have a material impact on our competitive position.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Our North American sales accounted for about 80% of our net sales in 1999.
In 1998, 10.6% of our sales were conducted in foreign currency and, in 1999,
7.4% of our sales were conducted in foreign currency. We do not purchase
material quantities of raw material in foreign currencies. Because of our
limited foreign sales and purchases, we do not have significant exposure to
market risks from changes in currency exchange rates. To manage any exposure we
may have to these changes, we may enter into transactions that have been
authorized according to documented policies and procedures. We do not use
derivatives. Because historically we have not had any debt, we have not had
exposure to market risks from changes in interest rates. To the extent that we
obtain a credit facility or incur other borrowings with variable interest rates,
we will be exposed to such risks.

CORPORATE STRUCTURE

We currently have no subsidiaries. On or prior to December 31, 2000, we
intend to create a holding company structure pursuant to which we will serve as
the parent holding company. We intend to have three subsidiaries--one for our
operations, one for finance matters and one for technological matters--and an
additional holding company that serves as an intermediate holding company
between us and the three new subsidiaries. One or more of these subsidiaries may
be organized as a limited liability company, and the remaining subsidiaries will
be organized as corporations. Our Board of Directors and sole stockholder have
approved this holding company structure for implementation when our management
deems

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appropriate. An advantage of the holding company structure is that it may
provide us with flexibility in connection with any future prospective
acquisitions, financings and other business activities following this offering.
For example, if we decide to engage in a business that we perceive poses higher
risks than our existing businesses, we may operate this business through a
subsidiary so as to insulate our other subsidiaries against the potential
liabilities. Other advantages of the holding company structure are that it helps
enhance managerial opportunities and accountability, and may have tax
advantages. A disadvantage of this structure is the restrictions on payment of
dividends described in "Dividend Policy" elsewhere in this prospectus.

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<PAGE> 33

BUSINESS

INTRODUCTION

We are the world leader in the development of high quality, natural
graphite-based products, with more patents relative to flexible graphite than
any other company in the world. We also are one of the largest manufacturers of
these products. We provide our customers with individually designed solutions
and products for use in diverse applications in a wide range of industries. We
are building on our 37-year history of developing innovative products for
automotive and industrial sealing applications to capitalize on the
commercialization of fuel cells and to expand into other markets.

We are one of the largest suppliers of natural graphite-based products for
use in the automotive, chemical and petrochemical industries. We have an
established business with state-of-the-art operations, advanced technological
development programs and experienced management. Our business has historically
generated positive cash flow from operations sufficient to fund our ongoing
operations and development activities. As a result, we believe that we are
well-positioned to capitalize on additional opportunities. We view the market
for fuel cell applications as our best long-term growth opportunity. We believe
that our strong relationship with Ballard combined with our technological and
operating strengths will continue to make flexible graphite Ballard's product of
choice and allow us to capitalize on the commercialization of fuel cell
technology in the transportation and portable power markets. We also believe
that our technologically advanced solutions and products will create new
applications in other markets and replace existing technologies due to superior
performance and cost-competitiveness, presenting us with growth opportunities.

PRODUCTS

We produce natural graphite-based products, including expandable graphite,
flexible graphite and advanced flexible graphite products. The versatility of
our proprietary processes and equipment enables us to modify our natural
graphite-based products to meet a variety of customer specifications. We work
with our customers to develop technologically advanced solutions, utilizing our
knowledge and expertise in expandable graphite, flexible graphite and advanced
flexible graphite.

EXPANDABLE GRAPHITE. We use a proprietary process to convert natural
graphite flake into expandable graphite. During this process, we can manufacture
expandable graphite with a number of specific properties. For example, by
changing expandable graphite's sensitivity to temperature, modifying its
particle size and imparting long-term stability in the product, we created
GRAFGUARD(R) graphite flake for use in fire protection applications. The
expansion property of our GRAFGUARD(R) graphite flake is the basis for its use
in a growing number of fire retardant applications. Expanding up to 250 times
its original thickness, the graphite flake generates a thick, non-burnable
insulating layer that retains the superior heat resistance of graphite. These
products consist of existing products, new products and products in development.
Revenue from the sale of our expandable graphite represented about 6% of our
total revenue in 1999 and about 7% of our total revenue in the quarter ended
March 31, 2000.

FLEXIBLE GRAPHITE. We produce flexible graphite from expandable graphite
flake, and can further fabricate the flexible graphite into a variety of sheet,
laminate and tape products. Flexible graphite is lightweight, conformable,
temperature-resistant and inert to most chemicals. Due to these characteristics,
it is an excellent sealing material that has been used primarily in high
temperature and corrosive environments in the automotive, chemical and
petrochemical industries. For example, automotive applications for our flexible
graphite products include head gaskets and exhaust gaskets as well as engine and
exhaust heat shields. We market our flexible graphite products under our
GRAFOIL(R) brand name. Revenue from the sale of our flexible graphite products
represented about 86% of our net sales in 1999 and about 85% of our net sales in
the quarter ended March 31, 2000. Sales of our flexible graphite products
represent our historical source of revenue.

ADVANCED FLEXIBLE GRAPHITE. We produce advanced flexible graphite by
subjecting expandable or flexible graphite materials to additional proprietary
processing. These additional processing steps alter the
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<PAGE> 34

properties and characteristics of flexible graphite to make materials with
modified electrical, thermal and strength characteristics. Advanced flexible
graphite can be used in the production of proton exchange membrane fuel cell
flow field plates, thermal management applications for computers and other
electronic devices, energy management applications in devices such as batteries
and supercapacitors, and heat management applications in high temperature
industrial furnaces. We market our advanced flexible graphite products under our
GRAFCELL(TM) brand for fuel cell applications and under our GRAFSHIELD(TM) brand
for high temperature industrial furnace applications. Revenue from the sale of
advanced flexible graphite was 8% of our total 1999 revenue and about 8% of our
total revenues in the quarter ended March 31, 2000. Some of these new products
are in the development stage.

OUR STRENGTHS

HISTORY OF PRODUCT AND SOLUTION INNOVATION. Our business was acquired by
the Carbon Products Division of Union Carbide Corporation in 1963. Since then,
we have identified many new applications for which our products can offer
advantages in performance and cost. We have a history of industry leadership
bringing innovative natural graphite-based products that provide technological
solutions to market. In the 1970s, GRAFOIL(R) flexible graphite sheet was
introduced as a replacement for asbestos in high temperature gasket
applications. In the 1980s, the use of GRAFOIL(R) sheet was successfully
marketed as a superior gasket for automotive engine applications. In the 1990s,
we began developing natural graphite-based products and solutions for
applications in fuel cells, electronics and construction and building materials.
We believe that our knowledge and technology base will continue to allow us to
identify new growth opportunities.

REQUIREMENTS CONTRACT WITH BALLARD. In 1999, we entered into a nine-year
requirements contract to supply Ballard with our products for use in flow field
plates in Ballard(R) fuel cells. We also entered into a three-year agreement to
collaborate with Ballard on further development of advanced flexible graphite
products for flow field plates. Ballard's Mark 900 fuel cell stack, which
utilizes our products, features a power density increase of almost 30%, occupies
about half the space and weighs 30% less than Ballard's previous automotive fuel
cell. Ballard has publicly characterized our relationship as a "Ballard Fuel
Cell Milestone." Our requirements contract with Ballard provides that Ballard
will buy from us all flexible graphite that it requires for use in flow field
plates for PEM fuel cells, and that we will provide these flexible graphite
products for use in flow field plates only to Ballard. We have developed a
strong relationship with Ballard, which we believe will allow us to capitalize
on the commercialization of fuel cell technology in the transportation and
portable power markets.

TECHNOLOGICAL AND MANUFACTURING EXCELLENCE. Our proprietary technology
allows us to scale our capacity and modify our products to meet our customers'
unique requirements. We believe that we are the only manufacturer that
chemically processes all of its natural graphite flake. This permits us to
precisely control the properties and quality of our products and reduces cycle
time, which we believe gives us a competitive advantage. We believe that our
processing technology will enable us to efficiently expand our operations as
customer demand for our products increases. We are currently installing
proprietary manufacturing capabilities at our Parma, Ohio facility, at a cost of
about $7 million, to produce advanced flexible graphite products for Ballard and
other customers.

RESEARCH AND DEVELOPMENT. Our research and development team has a proven
record of developing technological solutions for our customers, which we believe
will allow us to quickly leverage our innovations into commercially viable
products for new markets. About 19% of our 70 salaried employees are devoted to
research and development, and about 46% of that team are Ph.D. scientists. Our
research and development efforts are centered in UCAR's Product and Process
Development Center in Parma, Ohio, which is recognized as one of the leading
carbon and graphite research and development centers in the world. As a result,
we believe that we are well-positioned to provide individually designed
solutions to a wide range of industries.

INTELLECTUAL PROPERTY. The development and protection of our intellectual
property is an integral part of our corporate philosophy. We currently hold over
100 issued patents and 260 pending patent

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applications and perfected patent application priority rights worldwide. These
patent rights include over 20 issued patents and 90 pending patent applications
and perfected patent application priority rights worldwide in the fuel cell
technology area. These patent rights also include patents and pending patent
applications in:

- thermal management applications for computers and other electronic
devices,

- fire protection applications in construction and building materials,

- energy management applications in devices such as batteries and
supercapacitors,

- heat management applications in high temperature industrial furnaces, and

- high temperature sealing applications.

Our trademarks include those for our GRAFOIL(R), GRAFCELL(TM),
GRAFSHIELD(TM) and GRAFGUARD(R) product lines. We believe that our intellectual
property gives us a competitive advantage.

STRONG CUSTOMER RELATIONSHIPS. We believe that our customers view us as
the supplier of choice, due in part to our long-term customer support and joint
product and applications development efforts, as well as due to what we believe
is superior technical service. We have received numerous supplier recognition
awards, including Supplier of the Year honors from divisions of Federal Mogul
Corporation and Dana Corporation.

OUR BUSINESS STRATEGIES

The following are principal components of our business and growth strategy:

CAPITALIZE ON OUR RELATIONSHIP WITH BALLARD. We intend to capitalize on
our agreements with Ballard in order to participate in the commercialization of
PEM fuel cell technology. We also believe that our long-term alliance with
Ballard will allow us to benefit from continued research and development
breakthroughs in the fuel cell as well as other markets.

INNOVATE THROUGH RESEARCH AND DEVELOPMENT. We believe that our experience
in developing and producing products for the automotive, chemical and
petrochemical industries has positioned us to take advantage of new
opportunities. We continually enhance our understanding of natural
graphite-based materials and the relationship between process conditions and
product properties. We have active programs in place to develop products with
special thermal and electrical properties, which we believe will allow our
products to be used in new markets. In addition to the advances in materials for
flow field plates in PEM fuel cells, we are developing a flexible graphite-based
fuel cell gas diffusion layer, which allows distribution of reactant gases and
electric currents within the fuel cell. We intend to remain a leader in
technological solutions for these and other products by furthering our research
and development efforts, both on a stand-alone basis and through strategic
alliances.

IDENTIFY AND DEVELOP GROWTH OPPORTUNITIES AND INCREASE MARKET
AWARENESS. Leveraging our manufacturing and process technology strengths, we
are focusing on the development of new applications using specialized natural
graphite-based products. These applications include thermal applications for
computers and other electronic devices, fire protection applications in
construction and building materials, energy management applications in devices
such as batteries and supercapacitors and heat management applications in high
temperature industrial furnaces. We seek to identify technologies where our
products can offer unique advantages in performance and cost over current
products. We will continue to work closely with customers to develop and test
products that we believe will allow us to be first to market. We are in
discussions with various electronic and building materials companies relating to
innovative solutions and products that we believe will result in our penetration
into these large markets. We also intend to create greater market awareness for
our products by demonstrating product capability and performance that exceed our
customers' expectations and that we believe will be superior to those of
competing technologies. We anticipate that the attributes of our new products
will allow us to identify related applications for our natural graphite-based
solutions.

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IDENTIFY AND DEVELOP STRATEGIC ALLIANCES. We are pursuing strategic
alliances that we believe will enhance and complement our existing businesses
and accelerate growth opportunities across a wide range of markets. We believe
that these alliances will leverage our strengths and enable us to expedite
product development and commercialization, leading to increased sales, cash flow
and earnings. Our strategic alliances may take the form of joint ventures,
licensing agreements, supply agreements or other arrangements. Our relationship
with Ballard exemplifies one type of alliance we are pursuing.

AGGRESSIVELY PROTECT OUR INTELLECTUAL PROPERTY. We will continue to
protect our technology through patents and carefully maintained trade secrets.
As we develop new applications and products, we will apply for patents and
trademark registrations to protect our rights. We believe that an active policy
of protecting intellectual property is an important component of our technology
leadership strategy. This policy provides us with a level of exclusivity that
enhances the rewards of being first-to-market, thereby enabling us to achieve a
competitive advantage.

OUR APPLICATIONS AND MARKETS

We have developed our flexible graphite products for use in sealing
applications in the automotive, chemical and petrochemical industries.

We are developing our expandable graphite and advanced flexible graphite
products for use in:

- fuel cell applications in the transportation and power industries,

- thermal management applications for computers and other electronic
devices,

- fire protection applications in construction and building materials,

- energy management applications in devices such as batteries and
supercapacitors, and

- heat management applications for high temperature industrial furnaces.

SEALING APPLICATIONS IN THE AUTOMOTIVE, CHEMICAL AND PETROCHEMICAL
INDUSTRIES. We are one of the largest suppliers of flexible graphite for use in
the automotive, chemical and petrochemical industries. We believe that our
GRAFOIL(R) brand is one of the oldest and most widely recognized brands of
flexible graphite in the world. In automotive applications, GRAFOIL(R) is used
for head gaskets, exhaust gaskets, and as a component of engine and exhaust heat
shields. A gasket consists of material that is located between two pieces of
metal, so that when the pieces of metal are bolted together the gasket helps
seal the joint between the two pieces of metal. A heat shield prevents heat from
moving from one area to another, effectively shielding protected areas from
heat. A valve packing is a soft, pliable material that is used around a valve
stem to prevent leaks around the mechanism from opening and closing the valve.
When used as part of a gasket, GRAFOIL(R) flexible graphite is typically
combined to both sides of a perforated or flat metal sheet, and is used to seal
coolant ports and combustion gases in the engine. As an automotive heat shield,
GRAFOIL(R) products are usually used as an inner layer between two pieces of
metal, and act to move heat away from the engine or exhaust "hot spot". In
industrial applications, GRAFOIL(R) flexible graphite combined with perforated
or flat metal sheet is used as a temperature and chemical resistant gasket and
valve packings for chemical and petrochemical plants. These industrial sealing
products are widely recognized as being fire resistant and environmentally safe.
Federal Mogul currently is our largest customer for these sealing materials,
accounting for 32% of our net sales in 1999.

FUEL CELL APPLICATIONS IN THE TRANSPORTATION AND POWER INDUSTRIES. One of
our emerging market opportunities is in the area of power generation using fuel
cells. The advantages of using our advanced flexible graphite in fuel cell
applications such as flow field plates include its high electrical conductivity,
its light weight, its corrosion resistance and its cost effectiveness. We also
are developing a flexible graphite-based gas diffusion layer, which controls the
distribution of reactant gases and electric currents within the fuel cell.

Introduction to PEM fuel cells. A proton exchange membrane, or PEM, fuel
cell is an environmentally clean power generator that produces electricity
without combustion from hydrogen and

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oxygen. When hydrogen is supplied as the fuel, heat and water are the only
by-products. Proton exchange membrane fuel cells are suitable for, among other
things:

- transportation applications such as automobiles, buses and trucks,

- use by independent power producers and utilities in stationary power
applications, including distributed or on-site power generation for
commercial, industrial or residential uses, standby power and electricity
at remote locations, and

- portable applications such as portable power generators for equipment,
including household appliances and electronic devices located in places
without easy access to other sources of electricity.

BALLARD FUEL CELL STACK
[BALLARD FUEL GRAPHIC] [BALLARD FIELD PLATE GRAPHIC]

A fuel cell stack consists of many fuel cells. A fuel cell consists of two
flow field plates and a membrane electrode assembly, which is explained below.
The flow field plates direct the flow of gases within the fuel cell, disperse
waste heat and capture and transmit the electricity generated by the fuel cell.
The membrane electrode assembly consists of two electrodes, the anode and the
cathode, separated by a solid polymer electrolyte membrane. The electrodes, also
referred to as gas diffusion layers, are usually made of porous carbon materials
that are coated on one side with a thin platinum catalyst layer. Hydrogen fuel
dissociates into free electrons and protons in the presence of the platinum
catalyst at the anode. The free electrons are conducted in the form of usable
electric current through an external circuit. The protons migrate through the
polymer membrane to the cathode, where another flow field plate directs oxygen
from air and electrons from the external circuit to combine with hydrogen
protons to produce water and heat.

Advantages of proton exchange membrane fuel cells:

- environmentally friendly,

- fuel efficient,

- quiet operation, and

- low maintenance requirements.

Disadvantages of proton exchange membrane fuel cells:

- the current unavailability of a fuel distribution system, and

- historically high manufacturing costs in making a fuel cell with zero
emissions.

Ballard(R) fuel cells. We have been actively working with Ballard since
1992 on developing solutions based on our proprietary advanced flexible graphite
material for use as flow field plates in proton exchange membrane fuel cells. As
part of this relationship, in 1999 we entered into a nine-year requirements

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contract with Ballard. Under the terms of this agreement, we agreed to supply
our advanced flexible graphite products for use in flow field plates only to
Ballard. In turn, if Ballard uses flexible graphite in its flow field plates,
Ballard must purchase all flexible graphite that it needs to manufacture its
flow field plates from us. Ballard is not required to purchase any minimum
amount of flexible graphite from us under the contract. Additionally, our
existing agreements with Ballard do not currently cover the sale or manufacture
of our flexible graphite-based gas diffusion layer.

Under the requirements contract, we granted to Ballard a license to use
materials supplied by us in connection with Ballard's development, manufacture,
use or sale of flow field plates. We have agreed that, after the term of the
collaboration described below, if we develop material or technology that is
relevant for the development or manufacture of flow field plates, we will, to
the extent that we are not otherwise prohibited from disclosing the information
or selling the material or technology, advise Ballard of the new development and
offer to sell or license to Ballard the new materials or technology. Ballard has
in turn agreed that, after the term of the collaboration described below, if it
develops material or technology that is relevant for the development or
manufacture of flexible graphite materials, articles made from or of flexible
graphite materials (other than flow field plates), or compositions that include
flexible graphite materials, it will, to the extent that it is not otherwise
prohibited from disclosing the information or selling the material or
technology, advise us of the new development and offer to sell or license to us
the new materials or technology. If we default under the requirements contract,
with limited exceptions, the license granted to Ballard to exploit our
intellectual property will be deemed to have been granted for the remaining
portion of the nine-year term of the contract.

We also entered into a three-year collaboration agreement with Ballard in
1999. Under the terms of that agreement, we agreed with Ballard to cooperate in
the research and development of flow field plates for use in PEM fuel cells. We
granted Ballard an exclusive license to some of our intellectual property rights
which allow Ballard to make, use or sell materials under the collaboration
agreement in connection with the development, manufacture, use or sale of flow
field plates. This license extends six years beyond the term of the
collaboration agreement. Ballard sublicensed back to us on an exclusive basis,
so long as we are not in default, the right to use those intellectual property
rights solely to produce materials for Ballard under the collaboration
agreement. Each party also granted to the other a license to use some of its
intellectual property rights to carry out the work under the collaboration.
During the three-year collaboration period, we have agreed that we will not
develop or manufacture fuel cells or flow field plates except for Ballard and at
Ballard's request, and Ballard has agreed not to develop, manufacture, market or
sell the materials described in the agreement for use in flow field plates.
Either party can terminate the collaboration agreement without cause on ninety
days' notice, but if we terminate the agreement without cause or Ballard
terminates due to our default, the license granted to Ballard to exploit our
intellectual property will become perpetual and the sublicense granted by
Ballard to us will cease to apply. Conversely, if Ballard defaults or terminates
without cause, the license granted to Ballard to exploit our intellectual
property will terminate and we will be able to sell our products to parties
other than Ballard.

In January 2000, Ballard unveiled its next generation fuel cell stack, the
Mark 900, at the North American International Auto Show in Detroit, Michigan.
Ballard's Mark 900 fuel cell stack, which utilizes our products, features a
power density increase of almost 30%, occupies about half the space and weighs
30% less when compared to Ballard's previous automotive fuel cell stack. Ballard
has announced that the Mark 900 will be the architecture initially used for
Ballard's automotive applications.

Ballard's target applications for proton exchange membrane fuel cells are
in the transportation, stationary and portable power markets. Applications
include cars, trucks, buses, power plants and generators. Ballard has developed
prototype products that it believes meet or exceed the performance
specifications required in these markets. Together with its alliance partners
and associated companies, Ballard plans to bring to market its first portable
power products in 2001, its first transit bus engines in 2002 and its first
automobile engines between 2003 and 2005.

Transportation market. Currently, manufacturers of automobiles, buses and
other vehicles are searching for a viable alternative to the internal combustion
engine. Deficiencies of the internal combustion

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engine are the inherent pollution and the perceived limited supply of oil
reserves. Proton exchange membrane fuel cells provide the power of the internal
combustion engine, with few of its negative attributes. Like the internal
combustion engine, the proton exchange membrane fuel cell engine uses fuel from
an external source, but it produces power more quietly, with less vibration and
with an increase in fuel efficiency. Additionally, when pure hydrogen is used as
a fuel, a proton exchange membrane fuel cell system produces no air pollutants.

Another possible alternative to the internal combustion engine involves the
use of battery technology. Proton exchange membrane fuel cell powered vehicles,
however, are more convenient to operate than battery powered vehicles. The
refueling requirement for fuel cell powered vehicles is similar to that for the
internal combustion engine, and power is produced as long as fuel is supplied.
In contrast, batteries for battery powered vehicles only operate as power
storage devices and have a long recharging process.

DaimlerChrysler AG, Ford Motor Company and Ballard formed an alliance in
April 1998 under which DaimlerChrysler and Ford acquired an equity interest in
Ballard, and Ballard is responsible for the research, development,
commercialization, manufacturing, marketing and sale of fuel cells. Ballard and
these alliance partners formed XCELLSIS GmbH, which is developing and
commercializing proton exchange membrane fuel cell systems for automobiles,
buses and trucks. In forming the alliance, cash, intellectual property rights
and other assets were contributed by each party. Specifically, DaimlerChrysler
and Ford transferred or exclusively licensed to Ballard each party's proton
exchange membrane fuel cell assets, including related intellectual property.
Ballard, DaimlerChrysler and Ford each transferred its proton exchange membrane
fuel cell system assets, including related intellectual property, to XCELLSIS.
Each of Ballard, DaimlerChrysler, Ford and XCELLSIS agreed not to compete with
the other parties in the area of proton exchange membrane fuel cells and proton
exchange membrane fuel cells systems for automobiles, buses and trucks.
Generally, these non-compete agreements are binding upon each party so long as
DaimlerChrysler and Ford maintain ownership interests in Ballard or XCELLSIS.
Subject to exceptions, DaimlerChrysler and Ford must purchase fuel cells from
Ballard and must purchase fuel cell systems from XCELLSIS, but do not have to
purchase fuel cells containing our products. To the extent that our products are
used in Ballard(R) fuel cells, we believe that Ballard's alliance with
DaimlerChrysler and Ford will benefit us.

We believe that the alliance among DaimlerChrysler, Ford and Ballard, as
well as the formation of XCELLSIS, shows the substantial commitment made by
DaimlerChrysler and Ford to the commercialization of fuel cells. A number of
prototype fuel cell powered vehicles have demonstrated the fuel cell's
combination of performance, range and low to zero emissions over the last four
years. DaimlerChrysler, Ford, Toyota, Renault and General Motors have each
exhibited prototype vehicles. Six of the world's ten leading automobile
companies have announced plans to begin production on vehicles featuring fuel
cell systems between 2003 and 2005.

We believe, based on statements by Ballard's customers and other automobile
manufacturers, that initial commercial sales of proton exchange membrane fuel
cells for use in automobiles will occur between 2003 and 2005. Ballard(R) fuel
cells also have been supplied to General Motors, GTE Peugeot SA-Renault CEA,
Honda, Hyundai Motor Company, Mazda Motor Company, Nissan, Volkswagen AG and AB
Volvo. In addition to DaimlerChrysler and Ford, Honda, Mazda and Nissan have
used Ballard(R) fuel cells to power their prototype vehicles. Some of these
companies are developing their own proton exchange membrane fuel cells or proton
exchange membrane fuel cell systems. We believe that there are significant
market opportunities for proton exchange membrane fuel cell vehicles, and that
the strength of these markets will be supported by regulatory pressures for
cleaner, lower-emission vehicles. We estimate that in 1998 global production of
automobiles and light vehicles was about 52 million units.

Public authorities have been examining clean air technologies to improve
air quality within their jurisdictions. Federal transit/highway legislation
adopted in 1998 authorized grants of up to $200 million per year for five years
for the purchase of clean-fuel buses, including those powered by fuel cells.
Federal Clean Air Act regulations to overcome noncompliance with national
ambient air quality standards for ozone and other pollutants are placing
increasing demands on vehicle manufacturers to reduce emissions.

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<PAGE> 40

Such regulations include requirements that a manufacturer's vehicle sales as a
fleet meet non-methane organic gas limitations. Increasing sales of low and zero
emission vehicles assist manufacturers in meeting these requirements. The State
of California has obtained agreement from the seven leading vehicle
manufacturers that beginning in 2003, zero emission vehicles will comprise 2% of
their annual California sales of cars and light duty trucks, will increase to 5%
of such annual California sales in 2005 and will ultimately increase to 10% of
such annual California sales starting in 2008.

During 1998, Ballard(R) fuel cells were demonstrated and tested in several
prototype vehicles. XCELLSIS has been developing prototype bus engines for the
transit bus market for zero-emission fuel cell engines. Zero-emission Ballard(R)
fuel cells already have been used by the Chicago Transit Authority and British
Columbia Transit in two fuel cell bus field tests, each involving three buses
powered by these fuel cells. On March 23, 2000, Ballard and the Chicago Transit
Authority announced that the Chicago Transit Authority testing program had been
completed. Ballard has announced that it expects the British Columbia Transit
field trial program to conclude during the summer of 2000, and expects to
deliver its first fuel cell powered vehicle to the Palm Springs, California
transit agency. In April 2000, DaimlerChrysler announced plans to supply 20 to
30 Mercedes-Benz Citaro City buses powered by Ballard(R) fuel cells by 2003.

Portable power market. Although to date Ballard has approved the use of
our products only for automotive applications, we believe that the same
characteristics that make flexible graphite attractive for use in automotive
applications will make it attractive for portable power applications. Portable
power generators can be used to power a number of products including household
appliances and electronic equipment. Proton exchange membrane fuel cells may be
useful in the portable power market because they are compact, lightweight, quiet
and have high fuel efficiency. Ballard announced in January 2000 that it entered
into an agreement with Coleman Powermate, Inc., a subsidiary of Sunbeam
Corporation and a leader in portable electric generators and air compressors, to
develop and market portable generators using proton exchange membrane fuel cell
technology. In its announcement Ballard indicated that the architecture of its
Mark 900 fuel cell, which currently incorporates our products, would form the
architecture of Ballard's portable fuel cell products.

THERMAL MANAGEMENT APPLICATIONS FOR COMPUTERS AND OTHER ELECTRONIC
DEVICES. Advances in microchip technology require higher electrical power,
leading to increased heat generation in computers and other electronic devices.
Through our work with manufacturers in this sector, we have developed advanced
flexible graphite solutions that we believe will help meet these
heat-dissipation and component design challenges. We expect that our products'
superior ability to manage heat will allow engineers to redesign electronics to
reduce cost, size and weight while improving performance. Our advanced flexible
graphite offers many advantages over competitive products in the market for
mobile communications and other electronic devices, as compared to aluminum or
copper. These advantages include their:

- excellent ability to conduct heat,

- mechanical and thermal stability,

- lightweight, compressible and conformable nature,

- cost competitiveness, and

- ease of handling.

Our advanced flexible graphite can be used in computer products,
telecommunications equipment, analytical instruments and other electronic
devices. The Gartner Group has projected that 50.1 million computers will be
sold in the United States in 2000, growing to 77 million computers projected to
be sold in 2003. By the end of 1999, according to The Gartner Group, nearly 475
million people subscribed to cellular services worldwide. It is expected that
1.6 billion people will subscribe to cellular services worldwide by 2004,
according to The Gartner Group, and that the number of handsets worldwide will
increase from 283 million units to 993 million units between 1999 and 2004.

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<PAGE> 41

Essentially, every computer, cellular handset or other electronic device
needs improved systems for heat management. Our materials are currently being
evaluated by leading manufacturers of computers, chips and electronics. We
believe that our years of expertise related to flexible graphite technology, and
the advantages of advanced flexible graphite relative to competing products,
position us to penetrate the market for electronic components. As a result, we
believe that there is a significant opportunity to sell our products in this
market. Competing products for thermal applications for computers and other
electronic devices include metals such as aluminum, copper and stainless steel;
conductive rubber; conductive polyolefins; and fiber composites (carbon and
graphite fibers).

FIRE PROTECTION APPLICATIONS IN CONSTRUCTION AND BUILDING MATERIALS. Our
GRAFGUARD(R) expandable graphite flake is a fire retardant additive for
materials that require improved fire protection characteristics, including wood
products, foam, plastics and other construction and building materials.
Expandable graphite can be used to improve the performance of traditional fire
retardant additives, including phosphates, halogens and nitrogen compounds. We
believe that the growing use of expandable graphite will be driven by
increasingly stringent performance requirements for fire retardant materials.

According to SRI Consulting, the worldwide market for fire-retardant
additives in 1998 was $2.1 billion. Expandable graphite is a new entrant into
this market, with potential uses in high volume applications in construction
materials, foam products and plastics. We currently are the only U.S.
manufacturer of expandable graphite flake for fire retardant applications. We
believe that our continuous manufacturing process produces expandable graphite
with consistent properties to meet the needs of the construction and building
material industries.

One market for GRAFGUARD(R) expandable graphite is in engineered wood
products. The potential market for expandable graphite as a fire retardant
additive is significant because of the size of the market for engineered wood
products. Oriented strandboard, one of these products, is the most widely used
engineered wood product, with sales of about 20 billion square feet in North
America in 1999. Applications for oriented strandboard products include roofing,
siding, flooring and wood I-beams. The American Plywood Association estimates
that nearly 900 million linear feet of oriented strandboard will be used in wood
I-beams in 2000. The lack of a suitable fire retardant oriented strandboard
product, especially in wood I-beams, has limited the use of oriented strandboard
in residential and commercial applications where some fire resistance is
required. Recently, several manufacturers of wood products, including
Georgia-Pacific Corporation and J.M. Huber Corporation, have included expandable
graphite in patented formulations that can be used to protect engineered wood
products.

Manufacturers of foam products used in seating, mattresses and construction
insulation panels also are under pressure to improve the fire resistance of
their products. These foam products are highly flammable and can produce dense,
toxic smoke during a fire. Our GRAFGUARD(R) product expands when heated,
creating a non-burnable protective layer and making it an effective additive for
polymer foam applications. There are significant markets for fire retardant foam
products where expandable graphite can be used. A study by Chemical Market
Resources estimates that the United States and Canada used over 1.5 billion
pounds of polyurethane foam for building construction in 1998. Foam for
furniture and carpet backing accounted for another 2.4 billion pounds of
polyurethane foam in 1998.

ENERGY MANAGEMENT APPLICATIONS IN DEVICES SUCH AS BATTERIES AND
SUPERCAPACITORS. We have modified the performance characteristics of our
natural graphite materials to provide solutions for energy management
applications. Natural graphite can perform better than synthetic graphite in
alkaline and lithium-ion batteries, and it also may prove useful as a highly
conductive component of supercapacitors.

Graphite powders are a critical component of alkaline batteries, since they
provide the electrical conductivity necessary to give the best battery
performance. In alkaline batteries, powders made from expanded natural graphite
serve to extend battery life. Rechargeable lithium-ion batteries are used in a
growing number of portable electronics applications, including laptop computers
and cellular telephones. Lithium-ion batteries can store more power and be
recharged more times than other battery technologies. According to Paumanok
Publication Industrial Research Center, the worldwide battery market was about
$22 billion in 1999, with lithium-ion batteries accounting for about $2.0
billion. Both expanded graphite
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<PAGE> 42

powder and advanced flexible graphite sheet may potentially be used as anodes in
lithium-ion batteries. We have United States patents and patent applications
that cover proprietary processes and materials for using our advanced flexible
graphite products in lithium-ion batteries.

The emergence of supercapacitors is based on the need for energy storage
devices in the electronics industry. Capacitors have been used for years in
electrical circuits to store small amounts of charge and regulate the flow of
current. Supercapacitors are now being developed that can store thousands of
times more power in a smaller space, and can be recharged hundreds of thousands
of times. The high capacitance of a supercapacitor can be used:

- to replace more expensive lithium-ion batteries in low voltage
applications,

- in addition to a battery to provide pulse discharge in high voltage
applications, or

- alone as a battery replacement for some power applications in both low
and high voltage applications.

According to Paumanok Publications Industrial Research Center, worldwide
consumption of supercapacitors totaled approximately $115 million in 1999. As
they proceed to widespread commercialization, supercapacitors will be used in
power regulation, as backup power sources, and in power storage. We are
presently working to develop advanced flexible graphite materials that can be
used to replace the porous carbon materials used in current generation
supercapacitors.

HEAT MANAGEMENT APPLICATIONS IN HIGH TEMPERATURE INDUSTRIAL FURNACES. We
estimate that components and insulation for high temperature furnaces will be
nearly a $600 million market in the United States in 2000. We intend to target
the heat treating components segment, estimated to be a $540 million market, and
direct solidification components segment, estimated to be a $40 million market.
We believe that our engineered advanced flexible graphite products can provide
superior heat management solutions for insulation packages, induction furnaces,
high temperature vacuum furnaces and direct solidification furnaces. Existing
installations of our advanced flexible graphite products have confirmed that
furnace life is extended significantly, resulting in decreased downtime and
increased customer productivity. In addition, our heat management products are
easily fabricated and installed, have a reduced number of operational components
and improve the purity of the final customer product. Other advantages include
ease of fabrication and installation, consolidation of operational components
and reduction of process impurities. Competitive products for industrial furnace
insulation include carbon and graphite, ceramics and temperature resistant
metals.

RESEARCH AND DEVELOPMENT

We focus our research and development efforts on applications where our
graphite technology can provide unique solutions and performance advantages for
our existing and future customers. Our scientists and engineers develop
technical solutions by combining their own specialized training and vision with
our expertise in the use, manipulation and adaptation of natural graphite-based
materials. We believe that we can leverage our capability in technology for
processing natural graphite and our manufacturing excellence to efficiently and
effectively transform our ideas into commercially viable solutions.

Currently, about 19% of our 70 salaried employees are technical
professionals in our research and development group, including two Corporate
Fellows and six Ph.D. scientists. A significant portion of our research and
development efforts are focused on our alliance with Ballard. As we continue to
identify new market applications, we believe that our research and development
efforts will enable us to quickly leverage our technology, knowledge and
expertise across a variety of markets. We believe that our continued investment
in our technical staff is crucial to support our current development programs
and to position us for future growth. Research and development project teams are
currently working on applications in fuel cells, computers and other electronic
devices, construction and building materials, batteries and supercapacitors, and
insulation for high temperature industrial furnaces.

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<PAGE> 43

Our research and development efforts are centered in UCAR's Product and
Process Development Center in Parma, Ohio, which is recognized as one of the
leading carbon and graphite research and development centers in the world. Our
research and development in that facility is supported by state-of-the-art
equipment and instrumentation, pilot-scale manufacturing and an extensive
technical library. In 1999, our research and development costs represented about
5% of our net sales.

We believe that our technology, experience, proprietary "know-how" and
intellectual property make us unique in the development of natural
graphite-based products. We believe that we are well positioned to provide
solutions and products to technology intensive industries.

INTELLECTUAL PROPERTY

We believe that our innovative technology helps differentiate us from our
competitors. The protection of our technology through patents and carefully
maintained trade secrets is an integral part of our corporate philosophy.

PATENTS. Our policy is to aggressively seek worldwide patent coverage for
technological innovations developed by our research and development staff. We
continually evaluate the competitive benefits of seeking patent protection as
opposed to maintaining trade secrets. This policy helps ensure that we prevent
our competitors from making use of our proprietary technology. We currently hold
over 100 issued patents and 260 pending patent applications and perfected patent
application priority rights worldwide. These patent rights and patent
applications include over 20 issued patents and 90 pending patent applications
and perfected patent application priority rights worldwide in the fuel cell
technology area. These rights also include issued patents and pending patent
applications in thermal management applications for computers and other
electronic devices, fire protection applications in construction and building
materials, energy management applications in devices such as batteries and
supercapacitors, heat management applications in high temperature industrial
furnaces and high temperature sealing applications in the automotive, chemical
and petrochemical industries.

TRADEMARKS. We use trademarks to firmly identify our products in the
marketplace. Included among the trademarks we employ are GRAFOIL(R),
GRAFCELL(TM), GRAFSHIELD(TM), GRAFGUARD(R), GRAFOAM(TM), GRAFKOTE(R), ADVANCED
MULTIWRAP(TM), EXPANDOGRAF(R), and SUPER GTO(TM). We seek registration for our
trademarks wherever appropriate. For instance, our GRAFOIL(R) trademark has been
registered in over 30 countries.

TRADE SECRETS. We also have process and application technology and
"know-how" relating to the selection and treatment of natural graphite and the
production of flexible graphite and advanced flexible graphite products that we
believe allow us to maintain a technological advantage over our competitors. We
maintain this proprietary information as company trade secrets and implement
policies to prevent disclosure. Ongoing development programs are maintained in
confidence, and development programs undertaken with customers and suppliers are
governed by secrecy and joint development agreements. We require our employees
to sign confidentiality agreements relating to company information.

PROCESS TECHNOLOGY

We chemically process all of our natural graphite flake raw materials,
allowing us to precisely control the properties and quality of our finished
products. We manufacture our products in high volumes that meet a wide range of
customer specifications. We manufacture our products in a short period of time,
enabling us to maintain low levels of inventory. A large percentage of our
products is ordered and shipped within a 24-hour period.

EXPANDABLE GRAPHITE. We use sulfuric acid and oxidizing agents in a
continuous process to treat the natural graphite flake. The oxidizing agent
prepares the graphite flake so that the sulfuric acid can be introduced between
the layered planes of the graphite. The treated flakes are washed with water and
then dried. After insertion of the sulfuric acid, the natural graphite has been
converted into expandable graphite. Expandable graphite can be further modified
to prepare it for applications in the construction and building

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<PAGE> 44

materials industries, or it can be used as the "raw" material for manufacturing
flexible graphite. Our continuous, high volume, computerized treating process is
monitored and controlled to ensure that the graphite flake products possess
consistent and precise properties.

FLEXIBLE GRAPHITE. The production of flexible graphite begins by heating
expandable graphite in a high temperature furnace. The sulfuric acid between the
layers of the graphite flake is instantly vaporized, which causes the flake to
expand on average from 150 to 250 times its original size. The expanded flake is
vermicular (wormlike) in shape and has a low density. It passes to a settling
chamber and is conveyed to a calendering line. The calendering process consists
of moving the graphite through a system of rollers that progressively compresses
the graphite into a thinner, higher density sheet. This process produces a
continuous sheet of flexible graphite that is rolled into coils as long as 5,000
feet. The rolling lines have the capability of producing a wide range of
products to meet customer specifications and requirements. Each line is
monitored and computer-controlled to ensure the production of consistent, high
quality materials. We hold process patents to manufacture ultra-thin flexible
graphites of less than 0.008 inches in thickness. We believe that this gives us
a competitive advantage in applications for fuel cells, electronic devices,
computers and other applications. We manufacture on a continuous, modular basis
to provide manufacturing flexibility which enables us to cost-effectively add
incremental capacity to meet market demands.

In the automotive, chemical and petrochemical industries, we perform
additional operations to complete the manufacture of the flexible graphite into
the specific form and shape desired by the customer. These operations include
cutting to specific shapes and laminating graphite to a wide range of metals,
plastic and other materials.

ADVANCED FLEXIBLE GRAPHITE. We produce advanced flexible graphite products
by modifying our manufacturing processes for expandable graphite as well as
standard flexible graphite. These proprietary modifications are designed to
yield unique products that can serve new applications for fuel cell, thermal
management, fire protection and energy management as well as new applications in
the existing internal combustion and chemical and petrochemical industries. The
modifications include the incorporation of particular additives and additional
proprietary processing steps. We believe that we are the leader in our industry
in developing innovative products and solutions to problems for the markets we
serve. We are currently installing proprietary manufacturing capabilities at our
Parma, Ohio facility, at a cost of about $7.0 million, that will produce
advanced flexible graphite products for Ballard and others.

RAW MATERIALS

The primary raw material for the production of expandable and flexible
graphite products is natural graphite flake. Natural graphite flake exists in
many countries around the world. The U.S. Geological Survey, Mineral Commodity
Summaries, January 1999, reports a world reserve of over 16 million tons of
natural graphite and an inferred reserve exceeding 800 million tons of
recoverable natural graphite. We estimate that about 45% of these reserves are
in the flake form that we use as our raw material. U.S. Geological Survey
records indicate that the producers of natural graphite in China are
collectively the world's largest current suppliers. Other producers are located
in Canada, Madagascar, Zimbabwe, Russia, Ukraine, Brazil, Norway, South Korea
and India. We currently obtain natural graphite flake from several suppliers
through annual purchase contracts. None of these contracts contains a fixed
minimum purchase obligation. World consumption of natural graphite flake is
reported to have been 0.3 million tons during 1998. The large majority of
natural graphite in the world is mined from open pit operations. The refining of
the materials that are mined varies depending on the host material for the
natural graphite, but in general is accomplished by crushing and milling
followed by water flotation to separate the natural graphite from the host
materials.

In order to assure an adequate supply of high-quality, low-cost natural
graphite flake, we have entered into a memorandum of understanding with Mazarin
Mining Corporation Inc. relating to an arrangement to develop and commercialize
a natural graphite deposit located near Fermont, Quebec, Canada. During the
initial phase of the arrangement, we will conduct a feasibility study, which is
expected to cost about

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<PAGE> 45

$2 million and to be completed by the end of 2002, for which we will receive a
25% interest in the mine. After completion of the study, we may decide to
commence commercial production of the deposit with Mazarin, exercise an option
to extend the period for the development decision for five one-year periods
until 2007, or terminate the arrangement. In the case of an extension, we will
have to make option payments totaling $7.5 million (Canadian) if the option
period is extended for the full five years. If a development decision is made,
commercial production could start as early as 2004. If a development decision is
made, we will have the right to obtain up to a 60 percent interest in a Canadian
corporation that will own the interests in the deposit. Upon commencement of
commercial production, we would enter into a long-term off-take contract for the
natural graphite flake at a predetermined price. We will have the right to
purchase the entire production of natural graphite flake from the deposit. At
full capacity, the deposit should produce about 50,000 tons of natural graphite
flake per year, with the potential to double the annual output, making it one of
the largest single sources of natural graphite flake in the world. The deposit
has sufficient reserves to meet our projected graphite needs, including those
for fuel cell components, for the next 10 to 15 years. Consummation of the
arrangement is subject to, among other things, the negotiation and execution of
definitive agreements, completion of due diligence by the parties, and the
receipt of any required governmental approvals.

The other principal materials used in the manufacture of our products,
including sulfuric acid, are readily available from various suppliers, with our
1999 sulfuric acid usage being 0.01% of the current production levels in the
United States.

SALES

Historically, our primary customers consisted of gasket manufacturers who
supply the internal combustion, chemical and petrochemical industries. We sell
our products to these customers in the United States through our direct sales
force, whose members have an average of over eight years of experience with our
products. Currently, we have six direct field sales employees in the United
States. Our North American sales accounted for about 80% of our net sales in
1999. We sell our products outside of North America through one direct sales
employee and through independent sales agents and distributors. Most of these
independent sales agents and distributors have worked with us for over ten
years. Our customers outside of North America are located primarily in Western
Europe and the Far East. We are presently expanding, and intend to continue to
expand, our international market presence through the use of select,
full-service distributors.

We are establishing customer bases for applications in computers and other
electronic devices, construction and building materials and high temperature
industrial furnaces. We have hired additional employees to enhance our sales
efforts in these areas, and will continue to evaluate the need for additional
sales personnel. Other developing markets and strategic alliances are managed by
a combination of salespersons and/or members of management. As an example, our
work in support of Ballard is accomplished through a combination of technical
staff and senior management efforts.

Federal Mogul, a major supplier of gaskets and other sealing materials to
the automotive industry, is our largest customer. Federal Mogul, together with
the companies it acquired over the past three years, accounted for 34% of our
net sales in 1997, 35% of our net sales in 1998, and 32% of our net sales in
1999. Federal Mogul primarily purchases gasket facing material for use in the
manufacture of head gaskets and exhaust gaskets.

A large percentage of our customer orders are requested and shipped within
a 24-hour period. We ship our finished products to customers primarily by third
party truck lines and ocean vessels, using "just-in-time" techniques where
practicable. We generally store a limited amount of finished product at our
manufacturing facility in Lakewood, Ohio. We normally ship directly to customers
in North America and through agents in Japan, Korea, Taiwan and various
countries in Europe.

CUSTOMER SERVICE

We have a strong commitment to provide a high level of technical service to
our customers. We assist our customers in learning about and using our products,
improving their manufacturing processes and

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operations and solving their technical dilemmas. We employ seven engineers and
other technicians at our facilities to provide both on and off site technical
service. Our entire staff of development scientists and manufacturing engineers
is also available to support customers as needed. We work closely with our
customers to develop and test prototype materials. We believe that this
cooperation allows us to be first to market. Our customer sales team coordinates
sales, technology and manufacturing efforts to meet customer needs. We have an
excellent quality assurance system designed to meet the most stringent
requirements of our customers. The system is qualified and registered to QS-9000
as well as the ISO-9002 international quality standard. We believe that our
customer service is the best in the industry and has proven to be a significant
competitive advantage in retaining existing customers and developing new
customers. We were awarded Supplier of the Year honors by a division of Federal
Mogul Corporation in 1998 and a division of Dana Corporation in 1999.

COMPETITION

We believe that we are the largest manufacturer of flexible graphite in the
world, having supplied a significant percentage of the flexible graphite
purchased worldwide during 1999. The four other principal manufacturers of
flexible graphite are SGL Carbon Group, Le Carbone S.A. (Pty) Ltd., Hitachi
Corporation and Nippon Carbon Co., Ltd.

With respect to proton exchange membrane fuel cell applications, our
products compete with other graphitic products including fibers, composites and
synthetic graphite, and metal-based products such as stainless steel. Our
thermal management products compete with a wide variety of materials, including
copper and other metals, ceramics, conductive rubbers and greases. Our fire
protection products compete with compounds containing phosphates, halogens and
hydrated aluminas as well as many other materials. Our sealing products compete
with various fiber products such as asbestos, cellulose and synthetic composites
as well as stainless and other metals.

Historically, competition with respect to products sold to the gasket and
sealing markets has been based primarily on price. In the markets for new
applications, competition is based primarily on innovation, product performance,
cost effectiveness and customer service, with the relative importance of these
factors varying among products and customers.

EMPLOYEES

At March 31, 2000, we had a total of 145 employees, of whom 70 employees
were salaried and 75 employees were hourly. Given the broad experience and
extensive know-how of our work force, we routinely involve employees from all
disciplines in product innovation, process improvement and quality assurance. We
believe that our relationship with our employees is excellent. We have not been
subject to any work stoppages and none of our employees is covered by a
collective bargaining agreement.

PROPERTIES

We operate in the following facilities, which are owned or leased as
indicated.

<TABLE>
<CAPTION>
LOCATION OF FACILITY PRIMARY USE OWNED OR LEASED SQUARE FEET LEASE DURATION
-------------------- --------------------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Lakewood, Ohio Headquarters, Manufacturing Leased 207,000 10 years(1)
and Sales Office
Parma, Ohio Manufacturing Owned 29,000 N/A
Parma, Ohio Research and Development Leased(2) 7,900 2 years(3)
</TABLE>

--------------------
(1) Subject to a five-year renewal.
(2) We share these facilities with UCAR, as described under "Certain
Relationships and Related Transactions" elsewhere in this prospectus.
(3) Subject to one-year renewals.

We believe that our current facilities are sufficient for our current
operations. To meet our growth plan, we intend to increase the size of our
facilities and expand the geographic scope of our operations.

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ENVIRONMENTAL MATTERS

Our operations and properties are subject to increasingly stringent laws
and regulations governing health and environmental protection, including laws
and regulations governing air emissions, water discharges, waste management and
workplace safety. We believe that costs and liabilities associated with
environmental laws will not materially affect us.

These laws and regulations can impose substantial fines and criminal
sanctions for violations and require the installation of costly pollution
control equipment or operational changes to limit pollution emissions and
decrease the likelihood of accidental injuries or hazardous substances releases.
We are negotiating with the Ohio Environmental Protection Agency regarding
alleged violations of permit requirements governing air emissions from our
Lakewood, Ohio facility. We believe that we have corrected the alleged
violations, that the Ohio Environmental Protection Agency will reduce its
proposed fine of $117,600, and that, in any event, this matter will not have a
material adverse effect on our business, results of operations or financial
condition. In addition, current and future requirements under the Clean Air Act
may require us to incur costs to limit air pollutant emissions when we modify
existing equipment or install new equipment. We do not believe that such costs
will materially affect us.

We use and generate hazardous substances and wastes in our manufacturing
operations. In addition, the properties on which we operate are, and in the past
were, used for industrial purposes. Accordingly, we could potentially be
required to investigate and clean up contamination at on-site locations or at
third party disposal sites. We could also be subject to claims alleging personal
injury or property damage as a result of exposure to, or release of, hazardous
substances. These requirements and claims could result in material costs and
liabilities. For example, there is soil and groundwater contamination at our
Lakewood, Ohio facility, primarily in connection with historical operations
unrelated to our business. UCAR owns this property and is leasing it to us. As
between us and UCAR, UCAR also has retained all liabilities relating to
businesses other than our business, which may have impacted this property. Union
Carbide Corporation, UCAR's former parent has agreed to indemnify UCAR for most
of those liabilities retained by UCAR. We believe that (i) our graphite business
is unlikely to incur material environmental liabilities in connection with its
current and past operations at this facility and (ii) UCAR will meet its legal
and contractual obligations to handle environmental liabilities unrelated to our
business. If we are wrong as to either matter, we could incur substantial costs.
We are not currently conducting any remediation activities at the Lakewood
Facility, or at any other location, we have not been identified as a potentially
responsible party in connection with the investigation or clean up of any
contaminated property. We do not believe that costs or liabilities relating to
on-site or off-site contamination will materially affect us.

Estimates of future costs of health and environmental protection are
necessarily imprecise due to numerous uncertainties, including the impact of new
laws and regulations, the availability and application of new and diverse
technologies, the extent of insurance coverage, the identification of new
hazardous substance disposal sites at which we may be a potentially responsible
party and, in the case of sites subject to superfund and similar state laws, the
ultimate allocation of costs among potentially responsible parties and the final
determination of remedial requirements. Subject to the inherent imprecision in
estimating such future costs, but taking into consideration our experience to
date regarding environmental matters of a similar nature and facts currently
known, we believe that costs and capital expenditures (in each case, before
adjustment for inflation) for health and environmental protection will not
increase materially over the next several years.

LEGAL PROCEEDINGS

We are involved in various investigations, lawsuits, claims and other legal
proceedings incidental to the conduct of our business. Among others, we
currently are involved in a wrongful termination lawsuit brought in Italy by a
former distributor. We are vigorously contesting this lawsuit. While it is not
possible to determine the ultimate disposition of each of these proceedings, we
believe that the ultimate disposition of these proceedings will not have a
material adverse effect on us.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors, executive officers and some key employees, their respective
ages and their positions with us as of the date of this prospectus are as
follows.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gilbert E. Playford.......................... 53 Chairman of the Board
John J. Wetula............................... 41 Chief Executive Officer, President
and Director
Scott C. Mason............................... 41 Chief Financial Officer, Vice
President
Karen G. Narwold............................. 40 General Counsel, Vice President and
Secretary
Paul Calarco................................. 52 Director of Marketing and Strategic
Development
Robert A. Mercuri............................ 64 Director of Fuel Cell Technology
Robert C. Stamm.............................. 59 Director of Information Technology
Terry W. Wilkinson........................... 57 Director of Operations
Daniel W. Krassowski......................... 43 Director of Research and Development
Ronald A. Crawford........................... 35 Director of New Business Development
John R. Hall................................. 67 Director
Michael C. Nahl.............................. 57 Director
</TABLE>

Prior to or promptly after this offering, we intend to appoint two
additional independent directors, which we believe will be sufficient to satisfy
the independent director and audit committee requirements for listing on The
Nasdaq National Market. At that time, this prospectus will be amended to provide
information regarding our other directors.

Gilbert E. Playford. Mr. Playford became Chairman of the Board in May
2000. Since June 1998, he has been Chief Executive Officer, President and a
director of UCAR. Since September 1999, Mr. Playford has also been Chairman of
the Board of UCAR. From 1996 until June 1998, Mr. Playford was Chairman of the
Board, Chief Executive Officer and President of LionOre Mining International
Ltd., a company which he founded. He has continued as non-executive Chairman of
the Board of LionOre Mining International Ltd. since June 1998. From 1972 until
1996, Mr. Playford served in various positions, including Vice President,
Treasurer and Principal Financial Officer, with Union Carbide.

John J. Wetula. Mr. Wetula became Chief Executive Officer, President and a
director in May 2000. From 1986 until August 1999, Mr. Wetula served in various
management, marketing and manufacturing positions, including General Manager,
within UCAR's flexible graphite business, except for a one year assignment in
UCAR's graphite electrode business. Mr. Wetula began his career in 1982 in the
Carbon Products Division of Union Carbide.

Scott C. Mason. Mr. Mason became Chief Financial Officer in April 2000. He
became Vice President-Supply Chain Logistics for Union Carbide Corporation in
1999. From 1996 to 1999, Mr. Mason served as Director of Operations then as the
Business Director for the Unipol Polymers Business of Union Carbide. Mr. Mason
served from 1981 to 1996 in various financial, sales and marketing, operations,
and mergers and acquisition management positions at Union Carbide. He began his
career in 1981 in the Chemicals and Plastics Division of Union Carbide.

45
<PAGE> 49

Karen G. Narwold. Ms. Narwold became General Counsel and Secretary in
April 2000. Since September 1999, she has been General Counsel, Vice President
and Secretary of UCAR. She joined the Law Department of UCAR in July 1990 and
served as Assistant General Counsel from June 1995 to January 1999 and Deputy
General Counsel from January 1999 to September 1999. She was an associate with
Cummings & Lockwood, a law firm, from 1986 to 1990. Ms. Narwold is an employee
of UCAR, is paid by UCAR and will spend the majority of her time performing
duties for UCAR.

Paul Calarco. Mr. Calarco became Director of Marketing and Strategic
Development in April 2000. He became UCAR's Director of Fuel Cell Development
and Commercialization in 1999. From 1975 until 1999, Mr. Calarco served in
various management, marketing and manufacturing positions at UCAR and its
predecessors, including General Manager and Director of UCAR's Canadian
operations. Mr. Calarco began his career in 1969 in the Carbon Products Division
of Union Carbide.

Robert A. Mercuri. Mr. Mercuri became Director of Fuel Cell Technology in
April 2000. Mr. Mercuri has been a principal researcher in support of our
product development since 1980. He holds a Bachelor of Science degree in
Chemistry from Cleveland State University.

Robert C. Stamm. Mr. Stamm became Director of Information Technology in
April 2000. From 1994 to 1999, Mr. Stamm was a Director of UCAR's Health, Safety
and Environmental Affairs group. From 1974 until 1996, Mr. Stamm served in
various engineering and administrative management positions, including Site
Manager, within UCAR's flexible graphite business. Mr. Stamm began his career in
1966 in the Carbon Products Division of Union Carbide.

Terry W. Wilkinson. Mr. Wilkinson became Director of Operations in April
2000. He became Manager of Manufacturing for the flexible graphite division in
1986. From 1980 to 1986, he served in various manufacturing, marketing and
business management positions within the flexible graphite business. Mr.
Wilkinson began his career in 1964 in the Carbon Products Division of Union
Carbide and has worked in several of UCAR's other businesses and locations.

Dr. Daniel W. Krassowski. Dr. Krassowski became Director of Research and
Development in April 2000, and became Manager of Technology in 1999. From 1994
to 1999, Dr. Krassowski served in various management, sales, research and
development and new product development positions in the flexible graphite
business. Dr. Krassowski began his career with the Carbon Products Division of
Union Carbide in 1987. He received a Bachelor of Science degree in Chemistry
from the University of Santa Clara, and a Ph.D. in Inorganic Chemistry from the
University of Nevada-Reno.

Ronald A. Crawford. Mr. Crawford joined us in November 1999 and became
Director of New Business Development in April 2000. From 1993 until 1999, Mr.
Crawford was a principal of Crawford-Lalli & Company, a strategic marketing
consulting firm. From 1987 until 1993, Mr. Crawford served in various sales and
marketing positions for The Dow Chemical Company.

John R. Hall. Mr. Hall became a director in June 2000. He has been a
director of UCAR since November 1995. From July 1997 through December 1998, he
was a non-executive Chairman of Arch Coal, Inc., a chemical and plastics
distributor. He continued to serve as a director of Arch Coal until April 1999.
He retired as Chairman effective January 31, 1997 and as Chief Executive Officer
effective October 1, 1996 of Ashland Inc., a coal producer, positions which he
had held since 1981. Mr. Hall served in various engineering and managerial
capacities at Ashland Inc. since 1957. From April 1985 until May 2000 Mr. Hall
was a director of Reynolds Metals Company, an aluminum product manufacturer and
distributor. Mr. Hall is presently a director of Bank One Corporation, Canada
Life Assurance Company, CSX Corporation, Humana Inc., and USEC Inc.

Michael C. Nahl. Mr. Nahl became a director in June 2000. Since January
1999, he has been a director of UCAR. He is Senior Vice President and Chief
Financial Officer of Albany International Corp., a paper machine manufacturer.
He joined Albany International Corp. as Group Vice President, Corporate and was
appointed to his present position in 1983. He is a member of The Chase Manhattan
Corporation Northeast Regional Advisory Board.

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<PAGE> 50

BOARD STRUCTURE AND COMPENSATION

Our Certificate of Incorporation provides that our Board of Directors may
be comprised of one to fifteen members. Our Bylaws provide that our Board of
Directors fixes the exact number of directors comprising the entire Board of
Directors at any time. Pursuant to a stockholder's agreement with UCAR, our
Board of Directors is required to consist of six directors, one of whom is our
chief executive officer, three of whom are nominees of UCAR (one of whom must be
an independent director within the meaning of the listing rules of The Nasdaq
Stock Market and one of whom must be elected as our Chairman of the Board) and
two of whom must be independent directors within the meaning of such rules who
are not directors or employees of UCAR. In addition, pursuant to the agreement,
our Board of Directors is required to have an audit committee which satisfies
the requirements of such rules. Commencing at such time as UCAR ceases to own at
least 20% of our outstanding common stock, these provisions of the stockholder's
agreement will terminate and our Board of Directors will be divided into three
classes serving staggered three-year terms.

Our Certificate of Incorporation and Bylaws may serve to limit the ultimate
liability of directors and executive officers for breaches of their duties to
our stockholders and to us.

Our Board of Directors has adopted a policy that, effective as of the date
of the prospectus, directors who are not employees of us or UCAR will receive:

- an annual retainer of $10,000, plus a fee of $1,000 for each meeting of
our Board of Directors or a committee of our Board of Directors attended
(the retainer will be prorated for service as a director for part of a
year),

- an initial grant of options to purchase 12,200 shares of our common stock
under our Outside Director Equity Incentive Plan upon commencement of
service as a director, and

- an annual grant (including a grant for this year) of options to purchase
4,300 shares of our common stock under our Outside Director Equity
Incentive Plan.

The initial grants of options will have an exercise price equal to the initial
public offering price for directors who become or agree to become directors
prior to the date of this prospectus and will vest as described in "Outside
Director Equity Incentive Plan." All directors will be reimbursed for expenses
incurred in their capacity as such.

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<PAGE> 51

EXECUTIVE OFFICER COMPENSATION

The following table sets forth information relating to compensation
received in 1999 by our chief executive officer and four of our other executive
officers who were our most highly compensated employees (other than our chief
executive officer) in 1999 and whose salary and bonus exceeded $100,000. All
information set forth in the following table reflects compensation earned by
these officers for services rendered in all capacities to UCAR in 1999,
substantially all of which services (unless otherwise indicated) were rendered
in connection with our business when it was a division of UCAR.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- -----------------------------------
AWARDS PAYOUTS
----------------------- ---------
RESTRICTED SECURITIES LONG TERM
NAME AND VARIABLE OTHER ANNUAL STOCK UNDERLYING PLAN ALL OTHER
PRINCIPAL POSITIONS SALARY COMPENSATION COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION(1)
------------------- -------- ------------ ------------- ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Wetula, Chief
Executive Officer and
President............... $122,430 $ 85,000 $218,631(2) -- -- -- $4,766
Paul Calarco, Director of
Marketing and Strategic
Development............. $116,040 $100,000 $ 50,864(3) -- -- -- $4,539
Robert A. Mercuri,
Director of Fuel Cell
Technology.............. $ 98,640 $100,000 -- -- -- -- $3,854
Robert C. Stamm, Director
of Information
Technology.............. $113,760 $ 52,000 -- -- -- -- $5,829
Terry W. Wilkinson,
Director of
Operations.............. $108,420 $ 50,000 -- -- -- -- $4,238
</TABLE>

---------------
(1) Represents our matching contributions to the savings plans.

(2) Includes an expatriate allowance of $140,263, a relocation allowance of
$31,688 and international assignment premiums totaling $39,298.

(3) Represents a relocation allowance of $46,864 and international assignment
premiums totaling $4,000.

None of our most highly compensated officers received options to purchase
our common stock during 1999. The following table sets forth information
relating to options to purchase UCAR common stock granted by UCAR to our most
highly compensated officers during 1999.

UCAR OPTION GRANTS IN 1999

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR OPTION
UNDERLYING UCAR EXERCISE TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED IN 1999 PER SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Wetula............ 35,000 8.6 % $ 25.13 9/29/08 $484,750 $1,194,550
Paul Calarco.............. 3,900 1.05% $ 17.69 9/29/08 $ 38,025 $ 93,678
Robert A. Mercuri......... -- -- -- -- -- --
Robert C. Stamm........... -- -- -- -- -- --
Terry W. Wilkinson........ -- -- -- -- -- --
</TABLE>

None of our most highly compensated officers exercised options to purchase
UCAR common stock during 1999. The following table sets forth information
relating to options to purchase UCAR common stock held by our most highly
compensated officers during 1999.

48
<PAGE> 52

UCAR OPTION EXERCISES IN 1999

<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN THE MONEY
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT DECEMBER 31, OPTIONS AT DECEMBER 31, 1999
NAME EXERCISE REALIZED 1999 (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- ---------------- -------- ----------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
John J. Wetula....... -- -- 40,300 / 40,000 $112,663 / --
Paul Calarco......... -- -- 42,800 / 8,900 $138,188 / $468
Robert A. Mercuri.... -- -- 14,200 / 4,000 $ 3,900 / --
Robert C. Stamm...... -- -- 36,800 / 5,000 $137,438 / --
Terry W. Wilkinson... -- -- 19,300 / 4,000 $107,021 / --
</TABLE>

EMPLOYMENT AGREEMENT. We have entered into a three-year employment
agreement with Mr. Wetula to serve as our Chief Executive Officer and President.
The agreement automatically renews for successive additional one-year terms,
unless we give notice of non-renewal within 90 days prior to any renewal date or
Mr. Wetula gives notice of non-renewal at least one year prior to any renewal
date.

Mr. Wetula will receive a base salary (which may be increased by our Board
of Directors) of $175,000, plus annual cash bonuses commensurate with his
position.

The agreement provides for termination (subject to certain notice and other
procedural provisions) by us for cause or by Mr. Wetula for good reason and
contains a noncompetition covenant which will continue for a period of two years
beyond the expiration of the then current term.

SEVERANCE COMPENSATION AGREEMENTS. Our Board of Directors has approved
severance compensation agreements for Messrs. Wetula, Calarco and Mason. These
agreements provide for severance compensation equal to 2.99 times the relevant
officer's base salary and extended insurance coverage and reimbursement for
certain excise tax liabilities (and income tax liabilities on this
reimbursement). These officers are entitled to the compensation if they are
terminated (other than for cause) or resign for good reason within 12 months
after a change in control of us. For this purpose, a change in control of us
occurs on the date on which:

- any person or group becomes the beneficial owner of more than 15% of our
outstanding common stock,

- at the end of any two-year period, individuals who at the beginning of
the period were our directors, or individuals nominated or elected by a
vote of 66 2/3% of these directors or directors previously so elected or
nominated, cease to constitute a majority of our Board of Directors,

- our stockholders approve our liquidation or dissolution, or

- we consummate reorganizations, mergers, asset sales or similar
transactions.

No transaction by UCAR in our stock, and no change in control of UCAR, will be
considered a change in control of us for purposes of these severance
compensation agreements.

These officers also will have severance compensation agreements with UCAR.
The agreements with UCAR will provide for severance compensation equal to 2.99
times base salary and extended insurance coverage and reimbursement for certain
excise tax liabilities (and income tax liabilities on this reimbursement). These
officers are entitled to the compensation if they are terminated (other than for
cause) or resign for good reason within 12 months after a change in control of
UCAR. A change in control of UCAR under these agreements is defined in a similar
fashion as the definition of a change in control of us under the agreements
described above. The severance compensation agreements with UCAR will terminate
when UCAR no longer holds a majority of our common stock. The severance
compensation agreements with us provide that there will be no duplication of
benefits with respect to the same transactions under the agreements with us and
UCAR.

49
<PAGE> 53

EMPLOYEE EQUITY INCENTIVE PLAN

Our Employee Equity Incentive Plan was adopted by our Board of Directors
and approved by our sole stockholder. The plan is intended to assist us in
attracting, retaining and motivating highly qualified employees and to make our
compensation program competitive with those of other similarly situated
employers.

ADMINISTRATION. The plan is administered by our Board of Directors. It has
the right to interpret the plan, authorize awards to eligible participants, set
the vesting, transferability and other terms and conditions of awards, delegate
to the chief executive officer the right to grant awards to employees who are
not executive officers, establish administrative regulations to further the
purposes of the plan and take any other action necessary for the proper
implementation of the plan. Our Board of Directors has the right to delegate
administration of the plan to any committee of our Board of Directors. Awards
intended to qualify under Section 162(m) of the Internal Revenue Code as
performance-based compensation may only be granted by unanimous consent of our
Board of Directors or by a committee that qualifies to grant such awards under
Section 162(m).

PARTICIPATION. All of our employees are eligible to receive awards under
the plan. Participants receive awards to the extent granted as described above.
Participants in the plan are also eligible to participate in our other incentive
plans.

SHARES AVAILABLE FOR AWARDS. A total of 4,600,000 shares of our common
stock have been reserved for issuance under the plan, subject to adjustment for
stock splits, stock dividends, recapitalizations and similar events. These
shares may consist in whole or in part of authorized and unissued shares or
treasury shares. If an award expires unexercised or is forfeited, surrendered or
cancelled, terminated or settled in cash in lieu of common stock, the shares
previously used for such awards will be available for future awards under the
plan. In addition, each time an award is exercised, the number of shares
reserved for issuance under the plan will automatically be increased by the
number of shares subject to the exercised portion of the award. The number of
shares reserved for issuance under the plan will not be automatically increased
when an incentive stock option award is exercised. The number of shares reserved
does not include shares reserved for issuance (estimated to be about 3,337,566
shares based on the assumptions described in "Certain Relationships and Related
Transactions") pursuant to antidilution provisions of stock options issued by
UCAR, which provisions become applicable in the event of a distribution by UCAR
of the shares of our common stock held by it to its stockholders at a time when
UCAR owns a majority of our outstanding common stock. No individual may be
granted awards under the plan which in the aggregate cover more than 500,000
shares in any one calendar year and no more than 1,000,000 shares may be issued
upon exercise of incentive stock options. Each of these limits is also subject
to adjustment for stock splits, stock dividends, recapitalizations and similar
events.

AWARDS. The plan permits grants of awards of such type and subject to such
terms and conditions as our Board of Directors may determine, including the
following types of awards:

- options, including incentive stock options and non-qualified stock
options,

- stock appreciation rights,

- restricted stock,

- stock equivalent units,

- dividend equivalents, and

- performance units.

No award granted may have a term longer than ten years.

AWARDS GRANTED. We have granted non-qualified stock options to all of our
employees covering an aggregate of 251,550 shares under the plan which will
become effective on the date of this prospectus. Of those options, options as to
30,500 shares have been granted to Mr. Wetula, 9,150 shares to Mr. Calarco,

50
<PAGE> 54

18,300 shares to Mr. Mason, 9,150 shares to Mr. Stamm and 9,150 shares to Mr.
Wilkinson. All of our current employees have received options. Each option has
an exercise price equal to the initial public offering price and vests as to
one-third of the shares covered by the option on each anniversary of the date of
grant commencing on the third anniversary.

AWARD TERMS. To the extent that any award has an exercise price or similar
provision, the exercise price or similar provision cannot be lower than the fair
market value of our common stock on the date of grant. For options which will
become effective on the date of this prospectus, such value equals the initial
public offering price. For options which become effective after the date of this
prospectus, the exercise price will be equal to our common stock's closing sale
price on the last trading day prior to the date of grant as reported by the
principal exchange or market on which our common stock is listed or traded. If
there is no closing sale price for our common stock on the last trading day
prior to the date of grant, the exercise price will be determined by averaging
the highest bid and lowest asked prices of our common stock.

Unless otherwise determined by our Board of Directors, awards may be
exercised after termination of employment only:

- if the termination resulted from a participant's death, disability or
retirement with the right to receive a non-actuarially reduced pension,

- during the three year period commencing on the date of a participant's
termination of employment by us other than for cause,

- during the three year period commencing on the date of a participant's
termination of employment by us or the participant after a change in
control unless such termination is for cause, or

- if our Board of Directors decides that it is in our best interests to
allow exercise of an award following a participant's termination of
employment.

In no event may an award be exercised after the expiration date of the
award.

If a stock appreciation right is awarded, upon exercise of the stock
appreciation right the participant will receive an amount equal to the excess of
the fair market value of our common stock on the settlement date over the award
price of the stock appreciation right multiplied by the number of shares as to
which the stock appreciation right is exercised. Stock appreciation rights may
be awarded either separately or in conjunction with another award. The award
price for (1) stock appreciation rights awarded separately is the fair market
value of our common stock on the date the stock appreciation right is awarded
and (2) a stock appreciation right awarded in conjunction with any other award
is the fair market value of our common stock on the date the associated award
was made. However, where a stock appreciation right is granted retroactively in
tandem with or in substitution for another award, the award price of the stock
appreciation right will not be less than the fair market value of our common
stock on the date such other award was made. For purposes of the limitation on
the aggregate number of shares which may be issued under the plan, only the
number of shares actually issued in connection with the exercise of a stock
appreciation right is considered.

The exercise of a stock appreciation right granted in conjunction with
another award terminates that other award to the extent of the number of shares
as to which the stock appreciation right is exercised. Conversely, the exercise
of that other award terminates the associated stock appreciation right to the
extent of the shares as to which that other award is exercised. The exercise of
a stock appreciation right awarded separately has no effect on the
exercisability of any other award and the exercise of any other award has no
effect on the exercisability of a stock appreciation right awarded separately.

In addition to options and stock appreciation rights, our Board of
Directors may grant restricted stock, stock equivalent units, performance units
and dividend equivalents. A restricted stock award is an award of our common
stock where the shares granted are subject to restrictions on transfer,
conditions of forfeitability or any other limitations our Board of Directors may
determine appropriate. A stock equivalent unit is a cash award in an amount
equivalent to the fair market value of a share of our common stock. A
51
<PAGE> 55

performance unit is a cash award based on the attainment over specified periods
of individual performance targets or other parameters.

Awards may accrue dividend equivalents in the amount of and at such times
as cash dividends are paid on our common stock or, instead of dividend
equivalents, may provide for automatic awards of stock equivalent units on each
date that cash dividends are paid on our common stock. These stock equivalent
units will have a value equal to (1) the product of the dividend per share times
the total number of shares subject to awards held by the participant, divided by
(2) the fair market value of our common stock on the dividend payment date.

Awards may be vested at the time of grant or subject to subsequent vesting
based on satisfaction of conditions set by our Board of Directors. These
conditions may include:

- continuous service with us,

- achievement of specific business objectives or specified market prices
for our common stock, or

- other measurements of individual, business unit or company performance.

Our Board of Directors may set other terms and conditions, including:

- the manner in which awards are held,

- the extent to which the holder of awards has rights of a stockholder,

- the circumstances under which awards will be forfeited, and

- whether awards may be assigned, transferred, pledged or sold by the
participant.

Awards of restricted stock, stock equivalent units or performance units
that are intended to qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code will be conditioned on the achievement of
one or more of the following performance criteria, in the manner prescribed
under Section 162(m):

- earnings per share,

- total stockholder return,

- return on stockholders' equity,

- cash flow, and

- cumulative return on net assets employed.

Awards may be settled in cash, shares of our common stock, other awards or
combinations thereof. Our Board of Directors may also require or permit
participants to defer the issuance or vesting of shares or the settlement of
awards in cash. Our Board of Directors may also provide that deferred
settlements include the payment or crediting of interest on the deferred amounts
or the payment or crediting of dividend equivalents on deferred settlements
denominated in shares. Our Board of Directors may determine the manner in which
federal, state or local tax withholding obligations will be satisfied, where
applicable, including the reduction in the amount of shares or cash to be
delivered or paid to the participant or reimbursement by the participant in cash
or with shares of common stock at the fair market value on the settlement date.

The plan provides that, if a participant breaches any confidentiality or
noncompete provision to which the participant is otherwise subject, then the
participant will (1) immediately forfeit the right to exercise any option, stock
appreciation right or similar award, or to become vested in any restricted stock
or similar award, outstanding at the time of the violation and will (2) be
obligated to pay us liquidated damages in an amount equal to the amount of any
gains realized upon the exercise of any option, stock appreciation right or
similar award, plus any increase in value recognized in connection with any
restricted stock or similar award, at any time after the first date of the
violation. Our Board of Directors may, in its discretion, waive this provision.
52
<PAGE> 56

Our Board of Directors has the right to cancel all outstanding awards in
the event of a change in control of us, in which event we will be required to
pay participants an amount equal to the difference between the exercise price of
the canceled awards and the fair market value of the shares subject to the
canceled awards. For this purpose, a change in control of us has the same
meaning as it has under our severance compensation agreements.

FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of
awards granted pursuant to the plan under the Internal Revenue Code of 1986 are
summarized below.

The grant of a stock option or stock appreciation right will create no
immediate tax consequences for the participant or us. The participant will have
no taxable income upon exercising an incentive stock option, except that an
alternative minimum tax may apply, and we will not receive a deduction when an
incentive stock option is exercised. If the participant does not dispose of the
shares acquired on exercise of an incentive stock option within the two year
period beginning on the day after the grant of the incentive stock option or
within one year after the transfer of the shares to the participant, the gain or
loss on a subsequent sale will be a capital gain or loss. If the participant
disposes of the shares within the two year or one year period described above,
the participant generally will realize ordinary income and we will be entitled
to a corresponding deduction. Upon exercising a stock appreciation right or
stock option other than an incentive stock option, the participant must
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the common stock on the exercise
date, unless the shares are subject to restrictions contained in the plan. We
will receive a deduction for the same amount on the exercise date, or the date
the restrictions lapse.

With respect to other awards granted under the plan that are settled in
cash or shares of common stock that are either transferable or not subject to a
substantial risk of forfeiture, the participant must recognize ordinary income
in an amount equal to the cash or the excess of the fair market value of the
shares received over any amount paid for such shares. With respect to other
awards granted under the plan that are settled in shares of common stock that
are subject to restrictions as to transferability and subject to a substantial
risk of forfeiture, the participant must recognize ordinary income in an amount
equal to the fair market value of the shares received at the first time the
shares become transferable or not subject to a substantial risk of forfeiture,
whichever occurs earlier. A participant may elect, under Section 83(b) of the
Internal Revenue Code, to include the excess of the property's fair market value
over any amount paid for the property in income in the year in which the
property is received. If a valid election is made, then subsequent appreciation
in the value of the property does not result in additional compensation. We will
receive a deduction for the amount recognized as income by the participant if
certain reporting requirements are satisfied, subject to the provisions of
Section 162(m) of the Internal Revenue Code which provides for a possible denial
of a tax deduction to us for compensation for any named executive officer in
excess of $1 million in any year. The plan is designed so that awards intended
to qualify for the performance-based compensation exemption to the $1 million
cap on tax deductibility under Section 162(m), including stock options, should
qualify for the exemption.

The tax treatment to us upon disposition of shares acquired under the plan
will depend on how long the shares have been held. In the case of shares
acquired through exercise of an option, the tax treatment will also depend on
whether or not the shares were acquired by exercising an incentive stock option.
There will be no tax consequences to us upon the disposition of shares acquired
under the plan, except that we may receive a deduction in the case of
disposition of shares acquired under an incentive stock option before the
applicable holding period has been satisfied.

OUTSIDE DIRECTOR EQUITY INCENTIVE PLAN

Our Outside Director Equity Incentive Plan has been adopted by our Board of
Directors and approved by our sole stockholder. The purpose of the plan is to
assist us in attracting, retaining and motivating highly qualified directors.

53
<PAGE> 57

Our Outside Director Equity Incentive Plan is substantially the same as our
Employee Equity Incentive Plan with the following exceptions:

- 400,000 shares of common stock have been reserved for issuance under the
plan,

- only outside directors are eligible to participate in the plan, and

- the options expire on the earlier of ten years after the date of grant or
four years after an outside director ceases to be a director.

We have granted non-qualified stock options covering 41,600 shares under
the plan which will become effective on the date of the prospectus. Each option
has an exercise price equal to the initial public offering price and vests as to
all of the shares covered by the option on the third anniversary of the date of
grant or, if earlier, at such time as UCAR ceases to own a majority of our
outstanding common stock (but not sooner than the first anniversary of the date
of grant).

DEFERRAL PLAN

We participate in UCAR's compensation deferral plan for the benefit of
United States-paid management employees who participate in a variable
compensation program. The plan is effective for compensation that would
otherwise be payable on or after January 1, 2000. Under the plan, participants
are able to defer up to 85% of their variable compensation, up to 50% of their
base salary and up to 100% of their lump sum payments from UCAR's non-qualified
retirement plans. Distributions from the plan generally will be made upon
retirement or other termination of employment, unless further deferred by the
participant. In addition, a participant may irrevocably elect to receive interim
distributions prior to retirement or other termination of employment. We will be
responsible for distributions to our employees under the plan, and costs for
distributions prior to the date of this prospectus have been reflected in the
financial information included in this prospectus. Under the services agreement,
we will continue to participate in this deferral plan so long as UCAR owns at
least 80% of our outstanding common stock. At such time as UCAR owns less than
80% of our outstanding common stock, we will automatically cease such
participation in the plan, unless UCAR thereafter approves of our continued
participation.

SAVINGS PLAN

We participate in UCAR's savings plan for the benefit of United States-paid
regular employees. The plan is qualified under Sections 401(a) and 401(k) of the
Internal Revenue Code. The plan consists of two types of accounts, a personal
investment account to which participants may make contributions on an after-tax
basis and a tax deferred account to which participants may contribute on a
pre-tax basis. For each eligible employee who elects to participate in the plan
and makes a contribution thereto, we make a matching contribution. The matching
contribution is 50% of the amount contributed by the employee to the extent that
the employee contributes between 1% and 7 1/2% of the employee's compensation,
including profit sharing under group plans for employees in the United States.
The maximum contribution for any participant for any year is 17 1/2% of such
participant's compensation. Contributions to the plan are invested, as the
employee directs, in a stable value fund, life strategy funds, equity funds or
funds consisting of UCAR common stock, which is valued either at fair market
value or, subject to restrictions on resale and reinvestment, at a discount of
10% from fair market value. Distributions from the plan generally are made only
upon retirement or other termination of employment, unless deferred by the
participant. Under the services agreement, we will continue to participate in
this savings plan so long as UCAR owns at least 80% of our outstanding common
stock. At such time as UCAR owns less than 80% of our outstanding common stock,
we will automatically cease such participation in the plan, unless UCAR
thereafter approves of our continued participation.

RETIREMENT PLAN

We participate in UCAR's retirement program. Prior to February 25, 1991,
substantially all of UCAR's United States-paid employees, including those
employed in our business, participated in Union

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<PAGE> 58

Carbide's retirement program. Effective February 25, 1991, UCAR adopted its own
retirement program, which was similar to Union Carbide's retirement program at
that time. The cost related to our participation in UCAR's retirement program
will be borne entirely by us, and costs for participants prior to the date of
this prospectus have been reflected in the financial information included in
this prospectus. UCAR's retirement program covers substantially all of our
employees. Retirement and death benefits related to employee service through
February 25, 1991 are covered by Union Carbide's retirement program. Benefits
paid by Union Carbide's retirement program are based on final average pay
through February 25, 1991 plus salary increases, not to exceed 6% per year,
through January 26, 1995. All of our employees who retired prior to February 25,
1991 are covered under Union Carbide's retirement program. Subject to
limitations of the retirement program, all service and earnings recognized under
Union Carbide's retirement program prior to February 25, 1991 are recognized
under UCAR's retirement program. Under the services agreement, we will continue
to participate in this retirement plan so long as UCAR owns at least 80% of our
outstanding common stock. At such time as UCAR owns less than 80% of our
outstanding common stock, we will automatically cease such participation in the
plan, unless UCAR thereafter approves of our continued participation.

The following table sets forth the estimated annual benefits payable, based
on the indicated credited years of service and the indicated average annual
compensation used in calculating benefits, assuming a normal retirement at age
65 in 1999, under Union Carbide's retirement program and UCAR's retirement
program on a combined basis.

RETIREMENT PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL --------------------------------------------------------
COMPENSATION 15 20 25 30 35
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000.......................... $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500
150,000.......................... 33,750 45,000 56,520 67,500 78,750
250,000.......................... 56,250 75,000 93,750 112,500 131,250
500,000.......................... 112,500 150,000 187,500 225,000 262,500
</TABLE>

Under UCAR's retirement program, the monthly amount of an employee's
retirement benefit upon retirement at age 65 is a percentage of average monthly
compensation received during the three year period preceding retirement, or the
highest average monthly compensation received during any three calendar years in
the ten calendar years preceding retirement if it would result in a higher
pension benefit, multiplied by the number of years of service credit, less up to
50% of projected primary Social Security benefits and less any public pension,
except any military pension or any benefit under the Social Security Act. An
employee (1) who is age 62 or over with ten or more years of service credit or
(2) whose age and service credit add up to 85 years or more may voluntarily
retire earlier than age 65 with a retirement benefit unreduced because of early
retirement, based on years of service credit at the date of retirement. The
compensation covered by UCAR's retirement program consists primarily of salary
and most types of variable compensation. The benefits payable reflected in the
preceding table are calculated on a straight life annuity basis and are subject
to an offset for such Social Security benefits.

For federal income tax purpose, the amount of benefits that can be paid
from a qualified retirement plan is restricted. UCAR has adopted nonqualified
unfunded plans for payment of those benefits at retirement that cannot be paid
from its qualified retirement plan. These nonqualified plans together with its
qualified retirement plan constitute UCAR's retirement program. Employees may
elect to receive the payment of benefits from these nonqualified unfunded plans
monthly or in a lump sum. Benefits under all of the nonqualified plans may be
terminated if UCAR's Board of Directors determines that an employee has engaged
in activities that are detrimental to the interests of, or are in competition
with, UCAR. Except as described in the preceding sentence, the practical effect
of these non-qualified plans is to calculate benefits to all employees,
including those who are executive officers, on a uniform basis.

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<PAGE> 59

Benefits under these nonqualified plans are generally paid out of UCAR's
general assets, although they may also be paid through a grantor trust adopted
by it or by purchase of annuities. When UCAR purchases annuities, this does not
increase the after-tax amount of benefits to which employees are entitled, but
does relieve UCAR of liability for the benefits under the nonqualified plans
covered by such annuities.

As of March 31, 2000, our most highly compensated executive officers were
credited with the number of years of service under UCAR's retirement program as
follows: Mr. Wetula, age 41, is credited with 18 years of service, Mr. Calarco,
age 52, is credited with 31 years of service, Mr. Mercuri, age 64, is credited
with 46 years of service, Mr. Stamm, age 58, is credited with 34 years of
service, and Mr. Wilkinson, age 57, is credited with 36 years of service.

UCAR has adopted a grantor trust to assist it in providing for payment of
some benefit plan obligations to management which are currently paid out of its
general assets. These obligations include accrued benefits under nonqualified
retirement plans and severance obligations under employment and other
agreements. The trust is also used to set aside compensation which was deferred
under UCAR's compensation deferral plan.

The trust contains a benefits protection account which makes funds
available to the trustee to assist participants and their beneficiaries in
enforcing their claims with respect to those benefits and obligations upon a
change in control of UCAR. UCAR may from time to time contribute assets to or,
with the approval of a majority of UCAR's Board of Directors, withdraw assets
from the trust, other than from the benefits protection account, to which
$250,000 has been contributed, except that no withdrawal can be made after a
change in control until all such benefits and obligations are paid or
discharged. UCAR's Board of Directors may amend or terminate the trust at any
time prior to a change in control of UCAR. Upon a change in control of UCAR, the
trust becomes irrevocable, UCAR is required to make contributions to the trust
sufficient to discharge such obligations or pay such benefits and the trustee is
required to use the amounts held in the trust for such purposes. Upon a change
in control of UCAR, no amendment of the trust may be adopted without the written
consent of a majority of the participants and the beneficiaries who are
receiving benefits. Consistent with the requirements of applicable law, the
assets of the trust are subject to the claims of creditors of UCAR in the event
of UCAR's insolvency or bankruptcy. A change in control of UCAR is defined in a
similar manner to that of a change in control of us under our Employee Equity
Incentive Plan.

We intend to assume the obligations under UCAR's non-qualified retirement
plans allocable to our employees. In connection with these actions, we may make
changes in the benefit trust and some of the other arrangements described above.

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<PAGE> 60

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information known to us regarding the
beneficial ownership of our common stock at the date of this prospectus, before
and after giving effect to this offering, by each person known by us to own
beneficially 5% or more of our outstanding common stock, each of our directors,
each of our most highly compensated executive officers, and all of our directors
and executive officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER THIS
OFFERING(2) OFFERING(2)
---------------------- ----------------------
NAME AND ADDRESS(1) NUMBER PERCENT NUMBER PERCENT
------------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
UCAR International Inc.
3102 West End Avenue
Nashville, Tennessee 37203................... 29,850,000 100.0% 25,250,000 82.8%
Gilbert E. Playford
c/o UCAR International Inc.
3102 West End Avenue
Nashville, Tennessee 37203................... 29,850,000 100% 25,250,000 82.8%
John R. Hall
P.O. Box 391
Ashland, Kentucky 41114...................... 29,850,000 100% 25,250,000 82.8%
Michael C. Nahl
1373 Broadway
Albany, New York 12204....................... 29,850,000 100% 25,250,000 82.8%
John J. Wetula................................. * * * *
Paul Calarco................................... * * * *
Robert A. Mercuri.............................. * * * *
Robert C. Stamm................................ * * * *
Terry W. Wilkinson............................. * * * *
All directors and executive officers as a
group........................................ 29,850,000 100% 25,250,000 82.8%
</TABLE>

---------------
* Represents beneficial ownership of none of our outstanding common stock.

(1) Unless otherwise indicated above, the address for each stockholder is c/o
Graftech Inc., 11709 Madison Avenue, Lakewood, Ohio 44107.

(2) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares subject to options held by that
person that are currently exercisable or exercisable within 60 days after
the date of determination. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other person.
None of the options granted by us are exercisable within such 60-day period.
UCAR has sole voting and investment power with respect to the shares set
forth opposite its name. Mr. Playford is Chief Executive Officer, President
and Chairman of the Board of UCAR, and Messrs. Hall and Nahl are directors
of UCAR. They disclaim any beneficial ownership of shares owned by UCAR.

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<PAGE> 61

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At the time our business was founded, it was an unincorporated division
within the Carbon Products Division of Union Carbide Corporation. In 1989, the
Carbon Products Division was separated from Union Carbide's other businesses and
contributed to UCAR Carbon Company Inc., a wholly-owned subsidiary of Union
Carbide. UCAR Carbon Company Inc. was subsequently contributed to UCAR, which
became a public company in 1995. We remained a division of UCAR Carbon Company
Inc. until January 2000, at which time UCAR Carbon Company Inc. transferred
substantially all of the assets and liabilities related to its worldwide
natural, acid-treated and flexible graphite business to us.

We have summarized below the material terms of the various agreements
between us and UCAR, our parent company. The summary of these agreements is not
complete. You should read the full text of these agreements, which have been
filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.

INTERCOMPANY RELATIONSHIPS

As a division of UCAR, our business and all our assets and liabilities were
held by subsidiaries of UCAR, principally UCAR Carbon Company Inc. and its
subsidiary, UCAR Carbon Technology Corporation. We also received various
services from UCAR, including administrative, accounting, human resource and
legal services. UCAR also provided us with the services of a number of its
executives and employees. In consideration for these services, UCAR allocated a
portion of its overhead costs to us. Our management believes that the amounts
allocated to us have been no less favorable to us than the expenses we would
have incurred to perform such services ourselves or obtain them from
unaffiliated third parties.

Effective January 1, 2000, UCAR transferred to us substantially all of its
assets related to its worldwide natural, acid-treated and flexible graphite
business, and we assumed and agreed to indemnify UCAR for all liabilities, known
and unknown, arising out of that business. As between us and UCAR, UCAR retains
all environmental liabilities associated with our Lakewood, Ohio facility to the
extent that they do not arise out of that business. We also became a
participating subsidiary in UCAR's retirement program and savings plan and, as a
result, became jointly and severally liable for all obligations thereunder. So
long as there are no funding deficiencies which UCAR is unable to satisfy, our
contributions to the program and plan will be based on obligations to our
employees and retirees only. Additionally, we entered into agreements for the
continued provision of services, including:

- a corporate services agreement pursuant to which UCAR agreed to continue
to provide legal, accounting, tax, corporate human resources/benefits
administration, information systems, treasury/risk management and
investor relation services to us and will allow our employees to continue
to participate in UCAR's corporate relocation, pension, savings, medical
and other welfare plans at our cost until either we or UCAR terminate the
agreement, the cost of which is calculated as described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and otherwise on a basis that approximates the cost we would have been
allocated as if we were a division of UCAR; the agreement also will allow
us to continue to use the UCAR Product and Process Development Center in
Parma, Ohio for a period of two and a half years, with the option to
extend our use on a year to year basis, and

- a lease agreement, which covers the portion (about one-half) of UCAR's
facility in Lakewood, Ohio that is currently used to manufacture, store
and distribute our products, that continues through December 31, 2009
with an option for us to renew for one five-year period through December
31, 2014 and at an annual rent for the initial term of $213,210, which we
believe is equivalent to the fair market rent therefor.

The costs for the corporate services agreement, other than for the use of
the UCAR Product and Process Development Center in Parma, Ohio, currently are
$974,000 per year. Costs previously allocated to us with respect to such
services have been determined on the same basis as the agreement. These costs
were $780,000 in 1997, $804,000 in 1998, $828,000 in 1999 and $207,000 in the
quarter ended March 31,

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<PAGE> 62

2000. The costs for the use of the UCAR Product and Process Development Center
are equivalent to our proportionate share (based on the space used by us) of the
fixed costs for the UCAR Product and Process Development Center plus a
proportionate allocation to us of variable costs for the UCAR Product and
Process Development Center. These costs were $1.01 million in 1997, $1.33
million in 1998, $1.53 million in 1999 and about $0.2 million in the quarter
ended March 31, 2000.

Additionally, UCAR will allow the Company's employees to continue to
participate in UCAR's corporate relocation, pension, savings, medical and other
welfare plans, with costs allocated based on the payroll or actual costs,
whichever most accurately reflects costs. Costs were allocated to the Company
with respect to such services on the same basis as the agreement for all periods
and were $2.25 million in 1997, $2.46 million in 1998, $2.69 million in 1999 and
$0.66 million in the quarter ended March 31, 2000.

We incurred expenses of $7.57 million to UCAR in 1999, which expenses were
comprised of amounts pursuant to various intercompany agreements described in
this subsection and a tax sharing agreement described in the subsection below
captioned "Transfer Agreement." UCAR made payments to us of $1.11 million in
1999. These amounts do not include:

- net cash from our operations retained by UCAR, or

- net assets contributed to our capital by UCAR.

TRANSFER AGREEMENT

The transfer agreement provides for the transfer by UCAR to us of our
business, consisting of substantially all of UCAR's assets (other than real
estate) used in our business, together with specified real property located in
Parma, Ohio. The transfer was made as a contribution to our capital at a time
when we were a wholly owned subsidiary of UCAR.

Various agreements ancillary to the transfer agreement which detail the
transfer and various interim and ongoing relationships between UCAR and us
include:

- an intellectual property transfer agreement providing for the transfer of
intellectual property related to our business to us, and

- a tax sharing agreement providing for the filing of a consolidated income
tax return and allocation and payment of income tax liabilities until
such time as we cease to be a member of UCAR's consolidated tax group,
with us reimbursing UCAR as requested for any interim payments made on
its behalf, with final settlement being made 30 days after UCAR files its
consolidated tax return. Amounts due to UCAR for income taxes were $4.37
million in 1997, $4.51 million in 1998, $2.52 million in 1999 and about
$0.7 million in the quarter ended March 31, 2000.

We believe that the material terms of our agreements with UCAR are no less
favorable to us than we could have obtained from unrelated third parties.

OUR RELATIONSHIP WITH UCAR

We are currently a wholly-owned subsidiary of UCAR. After the completion of
this offering, UCAR will own about 82.8% of our common stock outstanding after
this offering, or about 80.2% if the over-allotment option is exercised in full.
Subject to 180-day lock-up agreements and applicable securities laws, UCAR may
at any time and from time to time sell any or all of the shares of our common
stock held by it publicly or privately to investors, joint venture or strategic
partners or others in one transaction or a series of transactions, distribute
any or all of such shares to its stockholders, or continue to hold such shares
indefinitely.

The decision with respect to which any of those actions will be taken is
within the discretion of UCAR's Board of Directors. UCAR has advised us that, in
making any such decision, UCAR's Board of

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<PAGE> 63

Directors will take such action that it believes to be in the best interests of
UCAR and its stockholders, and that the principal factors that it will consider
in making any such decision could include:

- the value of its shares of our common stock and the relative market
prices of our common stock and UCAR common stock,

- in the event of a distribution to stockholders, the issuance by the IRS
of a ruling that the distribution will be tax-free to UCAR stockholders
and will qualify as a reorganization for United States federal income tax
purposes (and UCAR intends to promptly file for such a ruling),

- the absence of any court orders or regulations prohibiting or restricting
the completion of any such action,

- developments affecting our business, and

- developments affecting UCAR's business, UCAR's need for funds, and
contractual restrictions to which UCAR may be subject.

STOCKHOLDER'S AGREEMENT

UCAR has entered into a stockholder's agreement with us providing for the
composition of our Board of Directors as described under "Management."

So long as UCAR owns 20% of our outstanding common stock, we are prohibited
by the stockholder's agreement from taking the following actions without UCAR's
consent:

- issuing common or preferred stock or rights to acquire such stock (other
than non-qualified options that do not vest within three years after the
date of this prospectus or, in the case of directors, earlier so long as
UCAR does not then own 20% of our outstanding common stock),

- merging or consolidating with other entities,

- selling stock of subsidiaries,

- acquiring or disposing of assets involving more than $5,000,000 (other
than in the ordinary course of business),

- declaring dividends or repurchasing stock,

- incurring debt (other than the proposed credit facility described in this
prospectus),

- making capital expenditures in excess of budgeted amounts,

- amending our Employee Equity Incentive Plan or Outside Director Equity
Incentive Plan, or

- amending our Certificate of Incorporation or Bylaws.

Under the stockholder's agreement we also have granted UCAR preemptive
rights. Subject to limitations, if we issue a third party any equity, other than
in pro rata issuances to all stockholders, and other than stock options that do
not vest except as described above, UCAR will have the right to purchase equity
on the same terms as the third party so as to maintain the same proportional
interest of our fully diluted equity as was held by UCAR prior to the issuance
of the equity. The stockholder's agreement also grants UCAR demand and piggyback
registration rights with respect to its shares of our common stock and provides
for indemnification and contribution by us with respect to liabilities arising
out of offerings covered by those registrations, including this offering.

Pursuant to the stockholder's agreement, we and UCAR have agreed not to
hire each other's employees without the consent of the other for so long as UCAR
owns at least 20% of our outstanding common stock or, if longer, for a period of
one year following the date of this prospectus.

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<PAGE> 64

FUTURE TRANSACTIONS WITH UCAR

Our Board of Directors has adopted a policy that all future transactions
with UCAR will be on terms no less favorable to us than are reasonably available
from unrelated third parties and must first be approved by a majority of our
directors who are not employees or directors of UCAR.

POTENTIAL ISSUANCE OF OPTIONS TO PURCHASE OUR COMMON STOCK IN RESPECT OF UCAR
OPTION PLANS

Pursuant to the stockholder's agreement and our Employee Equity Incentive
Plan, we have agreed to issue options to purchase our common stock to holders of
options to purchase shares of UCAR's common stock if, following this offering,
UCAR:

- owns at least a majority of our common stock, and

- elects to distribute its shares of our common stock (which distribution
we refer to as a "spin-off " transaction) to its stockholders.

Although UCAR has not made any decision as to whether it will distribute
its shares of our common stock to its stockholders, it intends to apply for a
ruling from the U.S. Internal Revenue Service that such a transaction would
constitute a tax-free transaction to UCAR and its stockholders. Following a
spin-off, we will issue to each holder of an option to purchase a share of UCAR
common stock outstanding on the effective date of the registration statement of
which this prospectus forms a part (which options we collectively refer to as
the "UCAR options") an option to purchase a number of shares of our common stock
that a holder of one share of UCAR common stock would receive in the spin-off
transaction. Assuming UCAR owned 25,250,000 shares of our common stock and had
45,120,000 shares of its common stock outstanding at the time of the spin-off
transaction, UCAR would distribute 0.56 shares (representing the result of
25,250,000 divided by 45,120,000) of our common stock to each holder of a share
of its common stock and we would issue an option to purchase 0.56 shares of our
common stock to each holder of an option to purchase one share of UCAR's common
stock.

The exercise price for each option issued by us will equal the result of
multiplying the original exercise price of the related UCAR option by a
fraction, the numerator of which is our market capitalization and the
denominator of which is the sum of our market capitalization and UCAR's market
capitalization. Market capitalization means the number of adjusted fully diluted
shares multiplied by the closing price of the shares prior to the spin-off
transaction. Adjusted fully diluted shares means outstanding shares, plus shares
subject to outstanding options, less the number of shares which could be
purchased at such closing price using the proceeds from the exercise of those
options. It is possible that the resulting exercise price could be below the
market value of our common stock.

As of March 31, 2000, UCAR had about 45,120,000 shares of its common stock
and options to purchase about 5,964,000 shares of its common stock outstanding.
As of March 31, 2000, UCAR's then outstanding options had an average exercise
price of $18.97 per share. The closing price of a share of UCAR common stock was
$12.69 per share on June 29, 2000. Assuming consummation of this offering, UCAR
would own 25,250,000 shares of our common stock. Assuming a spin-off had
occurred immediately following consummation of this offering and such closing
price and the midpoint of the price range set forth on the cover of this
prospectus were the appropriate prices for the calculation as well as no change
in the number and average exercise price of UCAR's outstanding options from that
described above, we would have issued an aggregate of 3,337,566 of these options
to holders of UCAR options. The average exercise price of these options would
have been $15.86 per share of our common stock, which is below the mid-point of
the offering range. Based on these assumptions, these shares would have
represented about 9.9% of our shares of common stock outstanding after this
offering. It is possible that the issuance of these options could result in
compensation expense to us. Using the methodology described above for
calculating adjusted fully-diluted shares, these options would represent 103,086
shares on a diluting basis.

UCAR has not determined when it may undertake a spin-off transaction, if at
all. We will not participate in any such decision.

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<PAGE> 65

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 200,000,000 shares of common
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par
value $.01 per share. At the date of this prospectus, there were 29,850,000
shares of our common stock outstanding, no shares of our preferred stock
outstanding, an aggregate of 5,000,000 shares of our common stock reserved for
issuance under our Employee Equity Incentive Plan and our Outside Director
Equity Incentive Plan and an indeterminate number of shares reserved for
issuance (currently estimated to be about 3,339,840 shares) pursuant to
antidilution provisions of stock options issued by UCAR, which provisions would
become applicable in the event of a distribution by UCAR of shares of our common
stock held by it to its stockholders at a time when UCAR owns a majority of our
outstanding common stock.

At the date of this prospectus, UCAR was the only record holder of our
common stock. It holds all 29,850,000 outstanding shares of our common stock.

COMMON STOCK

Holders of our common stock are entitled to one vote per share. Each
stockholder may vote either in person or by proxy. Stockholders are not entitled
to cumulate their votes for the election of directors.

Generally, other than amendments to our Bylaws and specified provisions
contained in our Certificate of Incorporation described below, all matters to be
voted on by stockholders must be approved by a majority or, in the case of
election of directors, by a plurality of the votes cast, at a meeting at which a
quorum is present, by holders of our common stock present, voting together as a
single class, subject to any voting rights to which holders of our preferred
stock may be entitled. The presence, in person or by proxy, of holders of a
majority of our outstanding common stock constitutes a quorum at any meeting of
stockholders.

Subject to preferences to which holders of our preferred stock issued after
this offering may be entitled, holders of our common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
our Board of Directors out of funds legally available therefor.

In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to share ratably in all of our assets which are
legally available for distribution to stockholders, subject to the prior rights
on liquidation of creditors and to preferences to which holders of our preferred
stock issued after this offering may be entitled. The holders of our common
stock do not have any preemptive, subscription, redemption or sinking fund
rights.

PREFERRED STOCK

Our Board of Directors has the authority to issue our preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions of any series of preferred stock, including dividend rights,
dividend rates, conversion rights, voting rights, redemption provisions and
prices (including sinking fund provisions) and liquidation preferences, and the
number of shares constituting and the designation of any such series, without
approval by our stockholders.

AUTHORIZED AND UNISSUED STOCK

CORPORATE USES. The unissued and unreserved shares of our capital stock
may be issued for a variety of corporate purposes, including future public or
private offerings to raise additional capital or facilitate acquisitions. Our
Board of Directors currently does not have any plans to issue additional shares
of our common stock or preferred stock (other than those reserved as described
above and except that we intend to adopt a stockholder rights plan after this
offering).

ANTI-TAKEOVER AND OTHER EFFECTS. One of the effects of the existence of
unissued and unreserved shares may be to enable our Board of Directors to issue
or threaten to issue such shares on terms or conditions or in a manner which
could discourage an attempt to effect a change in control (by means of a

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<PAGE> 66

tender offer, proxy contest or otherwise) and thereby to protect the continuity
of our management. The issuance of shares of our preferred stock, whether or not
related to any attempt to effect a change in control, may adversely affect the
rights of the holders of our common stock.

CHARTER AND STATUTORY PROVISIONS

Provisions of our Certificate of Incorporation and Bylaws and of Delaware
law may discourage both an attempt to effect a change in control and
consideration of stockholder proposals. They also might limit the ultimate
liability of our directors and executive officers for breaches of specified
their duties to us and our stockholders.

ELIMINATION OF DIRECTOR LIABILITY. Under Delaware law, directors of a
Delaware corporation can generally be held liable for certain acts and omissions
in connection with the performance of their duties to the corporation and its
stockholders. As permitted by Delaware law, however, our Certificate of
Incorporation contains a provision eliminating the liability of directors for
monetary damages for breaches of their duties to us and our stockholders. This
provision does not, however, eliminate liability for:

- breaches of duty of loyalty to us and our stockholders,

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

- transactions from which improper personal benefit is derived, and

- unlawful declaration of dividends or repurchases or redemptions of shares
of capital stock.

This provision applies to officers only if they are directors and are
acting in their capacity as directors. Although the issue has not been
determined by any court, we believe that the provision has no effect on claims
arising under federal securities laws. The provision does not eliminate the duty
of care, but does eliminates liability for monetary damages for breaches of the
duty under various circumstances. Accordingly, the provision has no effect on
the availability of equitable remedies, such as an injunction or rescission,
based upon a breach of the duty of care. Equitable remedies may not be wholly
effective to remedy the injury caused by any such breach.

STATUTORY PROVISIONS REGARDING BUSINESS COMBINATIONS. Although we are not
currently subject to Section 203 of the General Corporation Law of the State of
Delaware, our Certificate of Incorporation provides that if UCAR ceases to own
at least a majority of outstanding common stock, we will become subject to such
Section 203. In general, Section 203 prohibits an "interested stockholder" from
engaging in a "business combination" with a Delaware corporation for three years
following the date such person became an interested stockholder, unless:

- prior to the date the person became an interested stockholder, the Board
of Directors approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination,

- upon consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held
by directors who are also officers of the corporation and stock held by
certain employee stock plans, or

- on or after the date of the transaction in which the person became an
interested stockholder, the business combination is approved by the Board
of Directors and authorized at a meeting of stockholders by the
affirmative vote at least two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.

Section 203 defines a "business combination" to include:

- any merger or consolidation involving the corporation or any direct or
indirect majority-owned subsidiary and an interested stockholder,

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<PAGE> 67

- any sale, transfer, pledge or other disposition involving an interested
stockholder of 10% or more of the assets of the corporation,

- subject to some exceptions, any transaction which results in the issuance
or transfer by the corporation of any stock of the corporation to an
interested stockholder,

- any transaction involving the corporation or any direct or indirect
majority-owned subsidiary which has the effect of increasing the
proportionate shares of any class or series of stock of the corporation
or any subsidiary beneficially owned by the interested stockholder, or

- the receipt by an interested stockholder of any loans, guarantees,
pledges or other financial benefits provided by or through the
corporation.

In addition, Section 203 generally defines an "interested stockholder" as
any entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or controlling
or controlled by such entity or person.

INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our Bylaws provide that we will
indemnify each person who is or was involved in any legal proceeding brought
either by us or on behalf of us or by a third party because he is or was a
director or officer (or is or was serving at our request as a director, officer,
partner, member, employee, agent or trustee of another entity) against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
excise taxes, penalties and amounts paid in settlement) reasonably incurred or
suffered by that person in connection therewith and pay the expenses incurred in
defending the proceeding in advance of its final disposition, in each case to
the fullest extent authorized by Delaware law (as currently in effect or, if
applicable, as amended).

As a majority-owned subsidiary of UCAR, our directors, officers and some
key employees will be covered by UCAR's policy providing insurance to its
directors, officers and certain of its employees against various claims, losses
and expenses. The policy will cover up to $75 million in claims, losses and
expenses of our directors, officers and employees, including those arising in
connection with this offering. We will pay a portion of the premiums for this
policy.

OTHER PROVISIONS. Our Certificate of Incorporation includes provisions
limiting the restrictions on UCAR and our directors, officers and employees
concerning corporate opportunities, fiduciary duties and conflicts of interest.
Accordingly, no transaction and no agreement relating to competition, corporate
opportunities or other matters with UCAR or its directors, officers or employees
shall be void or voidable or constitute a breach of fiduciary duty if approved
by disinterested directors, officers or employees or is otherwise fair. In
addition, our Certificate of Incorporation provides no limitation on the
activities of UCAR or its directors, officers or employees, even if these
activities are competitive with us or relate to corporate opportunities which
could be valuable to us, and provides that there is no duty on the part of UCAR
or its directors, officers or employees in their capacity as stockholders to
vote or not vote on any matter submitted to a vote of our stockholders, to
attend stockholder meetings, to tender or sell or refrain from tendering or
selling any of our capital stock or to exercise or refrain from exercising any
rights belonging to them as stockholders of us. These provisions as they relate
to the directors, officers and employees of UCAR are applicable to them even
though they may also serve as directors, officers or employees of us.

Our Certificate of Incorporation and Bylaws provide that, while UCAR holds
or owns directly or indirectly at least a majority of our common stock,
directors may be removed with or without cause by the affirmative vote of the
holders of a majority of the shares of common stock then outstanding, and at any
other time, directors (other than those elected by the holders of our preferred
stock issued after this offering) may be removed only for cause and only by the
affirmative vote of holders of at least 67% of the voting power of all then
outstanding shares of our common stock.

Our Certificate of Incorporation and Bylaws also provide that, while UCAR
holds or owns directly or indirectly at least a majority of our common stock,
vacancies on our Board of Directors may be filled by either the affirmative vote
of the holders of a majority of our common stock then outstanding or by the

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<PAGE> 68

affirmative vote of a majority (unless our Bylaws provide for the vote of a
greater number) of the directors then in office, even if they constitute less
than a quorum. If UCAR ceases to hold or own directly or indirectly at least a
majority of our outstanding common stock, then any vacancy on our Board of
Directors, including a vacancy created by an increase in the authorized number
of directors, may be filled only by the affirmative vote of a majority (unless
our Bylaws provide for the vote of a greater number) of the directors then in
office, even if they constitute less than a quorum, and not by the stockholders
unless no directors are then in office.

In addition, our Certificate of Incorporation and Bylaws provide that
special meetings of stockholders may only be called by UCAR, or a director
nominated or designated by UCAR, while UCAR holds or owns directly or indirectly
at least 20% of the shares of our common stock then outstanding, or by a
majority of the entire Board of Directors, specified committees of the Board of
Directors, our chairman of the board or our president or chief executive
officer. Stockholder action may be taken only at an annual or a special meeting
of stockholders and that stockholder action may not be taken by written consent
unless UCAR holds or owns directly or indirectly a majority of our outstanding
common stock, or unless UCAR holds or owns directly or indirectly at least 20%
of our outstanding common stock and gives the first valid written consent. These
provisions, taken together, prevent stockholders from forcing consideration by
the stockholders of stockholder proposals over the opposition of our Board of
Directors, except at an annual meeting.

Our Bylaws provide that notice of nominations for the election of directors
to be made at, and business to be brought before, an annual or a special meeting
of stockholders by a stockholder must be received by the secretary not later
than 105 days before the meeting (except that, if notice or public disclosure of
the meeting is given or made fewer than 105 days before the meeting, the notice
need only be received within 10 days following the notice or public disclosure).
A notice regarding any nomination must contain a brief description of the
stockholder making the nomination and each nominee. A notice regarding any
business to be brought before the meeting must contain detailed information
regarding the business to be so brought, the reasons for conducting such
business at the meeting, the name and address of the stockholder proposing such
business and the classes and number of shares of capital stock owned
beneficially and of record by such stockholder, his or her affiliates, groups of
which he or she is a member and persons with whom he or she is acting in
concert, and any material interest of such stockholder in such business.
Although these provisions do not give our Board of Directors any power to
approve or disapprove stockholder nominations or proposals, they have the effect
of precluding a contest for the election of directors or the consideration of
stockholder proposals if the procedures established by the Bylaws are not
complied with and may have the effect of discouraging a stockholder from
conducting such a contest.

Our Certificate of Incorporation authorizes our Board of Directors, in
connection with taking any action, to consider factors other than the economic
benefit of such action to our stockholders. Some of these factors include the
long-term and short-term interest of our employees, suppliers, creditors and
customers and of the communities in which we engages in business.

Our Certificate of Incorporation provides that the affirmative vote of
either a majority of the entire Board of Directors, or the holders of a majority
of common stock entitled to vote for directors, will be required to amend,
modify or repeal any provision of, or adopt any provision inconsistent with, our
Bylaws or the provisions of our Certificate of Incorporation discussed above,
except that if such a change relates to special meetings of stockholders,
stockholder proposals or nominations, powers, qualifications, number, election,
term or resignations of directors or vacancies on our Board of Directors then
the holders of 67% of our common stock then outstanding will be required to
amend, modify or repeal any provision of our Bylaws or the provisions of our
Certificate of Incorporation discussed above. Our Certificate of Incorporation
provides that our Board of Directors, pursuant to a resolution adopted by the
affirmative vote of a majority of our entire Board of Directors, will be able to
amend, modify or repeal the Bylaws.

Our Certificate of Incorporation also provides that our directors will not
be personally liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except for any breach of

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<PAGE> 69

a director's duty of loyalty to us or our stockholders, acts or failures to act
that are not in good faith or which involve intentional misconduct or a knowing
violation of law, any transaction from which a director derives an improper
personal benefit and any unlawful payment of dividends or unlawful stock
purchase or redemption. Our Certificate of Incorporation provides further that
if the law is amended to authorize further elimination of or limitation on the
personal liability of our directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by law, as so amended.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C., New York, New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have an aggregate of 30,500,000
outstanding shares of our common stock. Of these shares, all of the shares sold
in this offering (including any shares sold upon exercise of the over-allotment
option) will be freely tradable without restriction or further registration
under the Securities Act, except that shares purchased by our "affiliates," as
that term is defined in Rule 144 under the Securities Act, may generally only be
sold in compliance with the limitations of Rule 144 described below.

The number of shares of our common stock that will be outstanding after
this offering excludes 4,600,000 reserved for issuance under our Employee Equity
Incentive Plan and 400,000 shares reserved for issuance under our Outside
Director Equity Incentive Plan, under which an aggregate of 293,150 shares are
subject to options that become effective on the date of this prospectus at an
exercise price equal to the initial public offering. It also excludes shares
issuable pursuant to antidilution provisions of employee stock options issued by
UCAR on or before the date of this prospectus. These provisions only become
applicable if UCAR distributes shares of our common stock held by it to its
stockholders at a time when UCAR owns a majority of the then outstanding shares
of our common stock. After this offering, we intend to register under the
Securities Act sales and resales of the shares reserved under the plans. We also
entered into a stockholders agreement with UCAR which gives it the right to
require us to register under the Securities Act sales and resales of the
outstanding shares of our common stock held by it and the shares reserved in
respect of stock options issued by it. To the extent that such shares are
registered, they will be freely tradeable (upon issuance, in the case of the
reserved shares) without restriction or further registration under the
Securities Act. To the extent that such shares are not registered, they are (or,
upon issuance will be, in the case of the reserved shares) deemed "restricted
securities" under Rule 144. Restricted securities may be sold in the public
markets in accordance with the provisions of Rule 144.

All outstanding and reserved shares of our common stock, except for the
shares sold in this offering, will be subject to the 180-day lock-up agreements
described below.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the registration statement of which this prospectus is a
part, a person, including any of our "affiliates," who has beneficially owned
his or her restricted securities for at least one year from the later of the
date such securities were acquired from us or, if applicable, one of our
affiliates, is entitled to sell, within any three month period, a number of
shares that does not exceed the greater of:

- 1% of the then outstanding shares of our common stock, which will equal
about 305,000 shares after this offering, or

- the average weekly trading volume of our common stock on The Nasdaq Stock
Market's National Market during the four calendar weeks preceding the
sale.

Sales under Rule 144 are also subject to requirements concerning the
availability of public information, manner of sale and notice. In addition,
under Rule 144(k), if a period of at least two years has elapsed from the later
of the date restricted securities were acquired from us or, if applicable, one
of our affiliates, a person who is not one of our affiliates at the time of sale
and has not been one of our affiliates for a period of three months prior to the
sale is entitled to sell the restricted securities immediately without
compliance with the foregoing requirements of Rule 144.

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180-DAY LOCK UP AGREEMENTS

We have agreed that we will not sell any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common stock, or permit the exercise of any employee stock options, without the
prior written consent of Credit Suisse First Boston Corporation, for a period of
180 days after the date of this prospectus. Each of UCAR and our directors and
executive officers has agreed that it will not sell or distribute to its
stockholders any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or enter into a
transaction which would have the same effect or economic consequences, without
the prior written consent of Credit Suisse First Boston Corporation, for a
period of 180 days after the date of this prospectus, subject to certain
exceptions.

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MATERIAL UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS

GENERAL

The following is a general discussion of certain U.S. federal income and
estate tax considerations with respect to the ownership and disposition of the
shares applicable to non-U.S. holders. In general, a non-U.S. holder is any
holder other than:

- a citizen or resident of the United States,

- a corporation (or other entity taxable as a corporation) created or
organized in the United States or under the laws of the United States or
of any state,

- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source, and

- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.

If a partnership holds shares, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding shares, we suggest
that you consult your tax advisor.

This discussion is based on current provisions of the Internal Revenue Code
of 1986, existing and proposed Treasury Regulations promulgated thereunder,
judicial opinions, and published positions of the Internal Revenue Service, and
all other applicable authorities, all of which are subject to change, possibly
with retroactive effect. This discussion does not address all aspects of U.S.
federal income and estate taxation or any aspects of state, local or non-U.S.
taxes, nor does it consider any specific facts or circumstances that may apply
to a particular non-U.S. holder that may be subject to special treatment under
the U.S. federal income tax laws (such as insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers in securities, and
certain U.S. expatriates). Accordingly, prospective investors are urged to
consult their tax advisors regarding the U.S. federal, state, local and non-U.S.
income and other tax considerations of acquiring, holding and disposing of the
shares.

DIVIDENDS

Dividends paid to a non-U.S. holder of the shares generally will be subject
to withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty. Under current Treasury Regulations, dividends paid before
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of the country of address, unless the payor has knowledge to the
contrary, for purposes of withholding and of determining the applicability of a
tax treaty rate. However, Treasury Regulations applicable to dividends paid
after December 31, 2000 eliminate this presumption, subject to certain
transition rules.

For dividends paid after December 31, 2000, unless non-U.S. holders comply
with certain IRS certification or documentary evidence procedures, they
generally will be subject to U.S. backup withholding tax at a 31% rate under the
backup withholding rules described below, rather than at the 30% or reduced tax
treaty rate. The certification requirement may be fulfilled by providing IRS
Form W-8BEN or W-8ECI to the payor. Non-U.S. holders should consult their own
tax advisors concerning the effect, if any, of the rules affecting post-December
31, 2000 dividends on their possible investment in the shares.

The withholding tax does not apply to dividends paid to a non-U.S. holder
that provides a Form W-8ECI, certifying that the dividends are effectively
connected with the non-U.S. holder's conduct of a trade or business within the
United States. Instead, the effectively connected dividends will generally be
subject to regular U.S. federal income tax as if the non-U.S. holder were a U.S.
resident. If the non-U.S. holder is eligible for the benefits of a tax treaty
between the United States and the holder's country
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of residence, any effectively connected income will be subject to U.S. federal
income tax only if it is attributable to a permanent establishment in the United
States maintained by the holder. A non-U.S. holder that is a corporation may
also be subject to an additional "branch profits tax" equal to 30% (or a lower
treaty rate) of its effectively connected earnings and profits for the taxable
year, subject to certain adjustments.

A non-U.S. holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund along with the required information with
the IRS in a timely manner.

GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK

In general, a non-U.S. holder will not be subject to U.S. federal income
tax on any gain realized upon the sale or other disposition of the shares
unless:

- the gain is effectively connected with a trade or business carried on by
the non-U.S. holder within the United States and, if a tax treaty
applies, is attributable to a U.S. permanent establishment of the
non-U.S. holder (in which case the branch profits tax discussed above may
also apply if the non-U.S. holder is a corporation),

- the non-U.S. holder is an individual who holds the shares as a capital
asset and is present in the United States for 183 days or more in the
taxable year of disposition and certain other tests are met,

- the non-U.S. holder is subject to tax under the provisions of the
Internal Revenue Code regarding the taxation of certain U.S. expatriates,
or

- we are or have been a U.S. real property holding corporation, for U.S.
federal income tax purposes (which we do not believe that we currently
are or will become), at any time within the shorter of the five-year
period preceding such disposition and such non-U.S. holder's holding
period. If we are or were to become a U.S. real property holding
corporation at any time during this period, gains realized upon a
disposition of the shares by a non-U.S. holder that did not directly or
indirectly own more than 5% of our common stock outstanding during this
period would not be subject to U.S. federal income tax, provided that our
common stock is "regularly traded on an established securities market"
(within the meaning of Section 897(c)(3) of the Internal Revenue Code).

BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS

We must report annually to the IRS the amount of dividends paid, the name
and address of the recipient, and the amount of any tax withheld. A similar
report is sent to the non-U.S. holder. Under tax treaties or other agreements,
the IRS may make its reports available to tax authorities in the recipient's
country of residence. Dividends paid on or before December 31, 2000 to an
address outside the United States are not subject to backup withholding, unless
the payor has knowledge that the payee is a U.S. person. However, a non-U.S.
holder will be required to certify its non-U.S. status in order to avoid backup
withholding at a 31% rate on dividends paid after December 31, 2000 or dividends
paid on or before that date to an address within the United States.

U.S. federal information reporting and backup withholding generally will
not apply to a payment of proceeds of a disposition of the shares where the
transaction is effected outside the United State through a non-U.S. office of a
non-U.S. broker. However, information reporting requirements, but not backup
withholding, generally will apply to such a payment if the broker is:

- a U.S. person,

- a "controlled foreign corporation" for U.S. federal income tax purposes,

- a foreign person 50% or more of whose gross income from certain periods
is effectively connected with a U.S. trade or business, or

- a foreign partnership with certain U.S. connections (for payments made
after December 31, 2000).
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Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption (and the broker has no actual knowledge to the
contrary).

A non-U.S. holder will be required to certify its non-U.S. tax status in
order to avoid information reporting and backup withholding at a 31% rate on
disposition proceeds where the transaction is effected by or through a U.S.
office of a broker.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. holder can be refunded or
credited against the non-U.S. holder's U.S. federal income tax liability, if
any, provided that the required information is furnished to the IRS in a timely
manner.

ESTATE TAX

Shares owned or treated as owned by an individual who is not a citizen or
resident (as defined for U.S. federal estate tax purposes) of the United States
at the time of death will be includible in the individual's gross estate for
U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise, and therefore may be subject to U.S. federal estate tax.

THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE NON-U.S. HOLDER OF THE SHARES SHOULD CONSULT ITS
OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE SHARES.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and UCAR have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation, Bear,
Stearns & Co. Inc., J.P. Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are acting as representatives, the following
respective numbers of shares of our common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Bear, Stearns & Co. Inc.....................................
J.P. Morgan Securities Inc..................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
---------
Total............................................. 5,250,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

UCAR has granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 787,500 additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

The underwriters propose to offer the shares initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a concession of $ per share. The underwriters and selling
group members may allow a discount of $ per share on sales to other
broker/dealers. After the initial public offering, the public offering price and
concession and discount to broker/dealers may be changed by the representatives.

The following table summarizes the compensation and estimated expenses we
and UCAR will pay.

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------------------- ----------------------
WITHOUT WITH WITHOUT WITH
OVER- OVER- OVER- OVER-
ALLOTMENT ALLOTMENT ALLOTMENT ALLOTMENT
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions paid by
us............................................ $ $ $ $
Expenses payable by us..........................
Underwriting discounts and commissions paid by
UCAR..........................................
Expenses payable by UCAR........................
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

UCAR, our parent company, intends to use more than 10% of the net proceeds
from the sale of the common stock to repay indebtedness owed by it to Credit
Suisse First Boston, a bank organized under the laws of Switzerland, acting
through its New York branch, and Morgan Guaranty Trust Company of New York,
affiliates of two of the underwriters. Accordingly, this offering is being made
in compliance with the requirements of Rule 2710(c)(8) of the National
Association of Securities Dealers, Inc. Conduct Rules. This rule provides
generally that if more than 10% of the net proceeds from the sale of stock, not
including underwriting compensation, is paid to the underwriters or their
affiliates, the initial public offering price of the stock may not be higher
than that recommended by a "qualified independent underwriter" meeting certain
standards. Accordingly, Bear, Stearns & Co. Inc. is assuming the
responsibilities of acting as the qualified independent underwriter in pricing
the offering and conducting due diligence. The initial public

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offering price of the shares of common stock will be no higher than the price
recommended by Bear, Stearns & Co. Inc.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement under the Securities Act relating to, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, and that we will not permit the
exercise of any employee stock options, without the prior written consent of
Credit Suisse First Boston Corporation, for a period of 180 days after the date
of this prospectus.

Subject to limited exceptions, each of UCAR and our directors and executive
officers has agreed that it will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock, whether
any such aforementioned transaction is to be settled by delivery of our common
stock or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of Credit Suisse First Boston Corporation, for a
period of 180 days after the date of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to about 303,000 shares of common stock for employees, directors, and
certain other persons associated with us who have expressed an interest in
purchasing common stock in this offering. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.

We and UCAR have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments which the underwriters may
be required to make in that respect.

We have applied to list our common stock on The Nasdaq Stock Market's
National Market.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation among
us, UCAR and the representatives, and may not reflect the market price for our
common stock that may prevail following this offering. We, UCAR and the
representatives will consider, among others, the following principal factors in
determining the initial public offering price:

- the information in this prospectus and otherwise available to the
representatives,

- market conditions for initial public offerings,

- the history of and prospects for the industry in which we compete,

- our past and present operations,

- our past and present earnings and current financial position,

- the ability of our management,

- our prospects for future earnings,

- the present state of our development,

- the recent prices of, and the demand for, publicly traded common stock of
generally comparable companies, and

- the general condition of the securities markets at the time of this
offering.

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<PAGE> 77

We can offer no assurance that the initial public offering price will
correspond to the price at which our common stock will trade in the public
market subsequent to this offering or that an active trading market for our
common stock will develop and continue after this offering.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of our common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations.

74
<PAGE> 78

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of common stock in Canada is being made only on a private
placement basis exempt from the requirement that we and the selling stockholder
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of common stock are effected. Accordingly, any resale of
common stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholder and the
dealer from whom such purchase confirmation is received that (i) such purchaser
is entitled under applicable provincial securities laws to purchase such common
stock without the benefit of a prospectus qualified under such securities laws,
(ii) where required by law, that such purchaser is purchasing as principal and
not as agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein and the selling stockholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in common stock
in their particular circumstances and with respect to the eligibility of common
stock for investment by the purchaser under relevant Canadian legislation.

75
<PAGE> 79

LEGAL MATTERS

Legal matters with regard to our common stock will be passed upon for us by
Kelley Drye & Warren LLP, New York, New York and Stamford, Connecticut. The
underwriters have been represented by Cravath, Swaine & Moore, New York, New
York.

EXPERTS

Our Financial Statements at December 31, 1998 and 1999 and for each of the
years in the three-year period ended December 31, 1999 have been included herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 with
respect to the shares of our common stock offered hereby. This prospectus, which
is a part of the registration statement, does not contain all of the information
included in the registration statement and the exhibits and schedules thereto.
You may review a copy of the registration statement, including the exhibits and
schedules thereto, at the SEC's public reference room at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 or Seven World Trade Center, 13th
Floor, New York, New York 10048 or Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
SEC.

The registration statement, including the exhibits and schedules thereto,
and our future filings with the SEC can also be reviewed by accessing the SEC's
Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.

76
<PAGE> 80

GRAFTECH INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS (AUDITED)
Independent Auditors' Report................................ F-2
Balance Sheets at December 31, 1998 and 1999................ F-3
Statements of Operations for Each of the Years in the
Three-Year Period Ended December 31, 1999................. F-4
Statements of Stockholder's Equity for Each of the Years in
the Three-Year Period Ended December 31, 1999............. F-5
Statements of Cash Flows for Each of the Years in the
Three-Year Period Ended December 31, 1999................. F-6
Notes to Financial Statements............................... F-7
FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheets at December 31, 1999 and March 31, 2000...... F-17
Statements of Operations for the Three Months Ended March
31, 1999 and 2000......................................... F-18
Statement of Stockholder's Equity for the Three Months Ended
March 31, 2000............................................ F-19
Statements of Cash Flows for the Three Months Ended March
31, 1999 and 2000......................................... F-20
Notes to Financial Statements............................... F-21
</TABLE>

F-1
<PAGE> 81

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Graftech Inc.:

We have audited the balance sheets of Graftech Inc. as of December 31, 1998
and 1999 and the related statements of operations, stockholder's equity and cash
flows for each of the years in the three-year period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Graftech Inc. as of December
31, 1998 and 1999, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles.

/s/ KPMG LLP

Cleveland, Ohio
March 24, 2000, except as to
notes 5, 7 and 11, which are as of
June 29, 2000

F-2
<PAGE> 82

GRAFTECH INC.

BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 152 $ 18
Accounts receivable, net of allowance of $130 in 1999..... 4,944 4,891
Intercompany receivables.................................. -- 68
Other receivables......................................... 189 176
Inventories:
Raw materials and supplies............................. 532 549
Work in process........................................ 1,057 881
Finished goods......................................... 1,385 1,302
------- -------
Total inventories................................. 2,974 2,732
------- -------
Prepaid expenses and other current assets................. 164 317
------- -------
Total current assets.............................. 8,423 8,202
------- -------
Fixed assets................................................ 23,956 25,608
Less: accumulated depreciation.............................. (9,180) (9,639)
------- -------
Net fixed assets.................................. 14,776 15,969
------- -------
Total assets...................................... $23,199 $24,171
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ 1,287 $ 1,584
Accrued compensation and related costs.................... 1,181 1,274
Taxes payable............................................. 4,689 2,621
Other accrued liabilities................................. 87 176
------- -------
Total current liabilities......................... 7,244 5,655
Postretirement benefits, other than pensions................ 2,597 2,774
Pension and related benefits................................ 1,246 1,514
Deferred taxes, net......................................... 1,706 1,752
------- -------
Total liabilities................................. 12,793 11,695
------- -------
Stockholder's equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $.01 par value; 200,000,000 shares
authorized, 29,850,000 shares issued and outstanding at
December 31, 1998 and 1999............................. 299 299
Divisional equity......................................... 10,107 12,177
------- -------
Total stockholder's equity........................ 10,406 12,476
------- -------
Commitments, contingencies and subsequent event
Total liabilities and stockholder's equity........ $23,199 $24,171
======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-3
<PAGE> 83

GRAFTECH INC.

STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Third party................................................. $36,065 $35,694 $32,669
Intercompany................................................ 1,615 1,895 1,113
------- ------- -------
Net sales................................................. 37,680 37,589 33,782
------- ------- -------
Third party................................................. 21,217 20,910 20,792
Intercompany................................................ 883 1,021 645
------- ------- -------
Cost of sales............................................. 22,100 21,931 21,437
------- ------- -------
Gross profit...................................... 15,580 15,658 12,345
------- ------- -------
Research and development.................................... 1,012 1,326 1,534
Selling, administrative and other expenses.................. 3,720 3,462 4,680
Other (income) expense, net................................. 216 (100) 32
------- ------- -------
4,948 4,688 6,246
------- ------- -------
Operating profit.................................. 10,632 10,970 6,099
Provision for income taxes.................................. 4,374 4,511 2,516
------- ------- -------
Net income........................................ $ 6,258 $ 6,459 $ 3,583
======= ======= =======
Earnings per common share
Basic earnings per share.......................... $ 0.21 $ 0.22 $ 0.12
Diluted earnings per share........................ $ 0.21 $ 0.22 $ 0.12
======= ======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-4
<PAGE> 84

GRAFTECH INC.

STATEMENTS OF STOCKHOLDER'S EQUITY
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
COMMON DIVISIONAL STOCKHOLDER'S
STOCK EQUITY EQUITY
------ ---------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996................................ $299 $13,195 $13,494
Net income.................................................. -- 6,258 6,258
Other changes in divisional equity.......................... -- (8,309) (8,309)
---- ------- -------
Balance at December 31, 1997................................ 299 11,144 11,443
Net income.................................................. -- 6,459 6,459
Other changes in divisional equity.......................... -- (7,496) (7,496)
---- ------- -------
Balance at December 31, 1998................................ 299 10,107 10,406
Net income.................................................. -- 3,583 3,583
Other changes in divisional equity.......................... -- (1,513) (1,513)
---- ------- -------
Balance at December 31, 1999................................ $299 $12,177 $12,476
==== ======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-5
<PAGE> 85

GRAFTECH INC.

STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income................................................ $ 6,258 $ 6,459 $ 3,583
Non-cash (credits) charges to net income:
Depreciation and amortization.......................... 999 1,101 1,133
Provision for doubtful accounts........................ -- -- 130
Loss on disposal of fixed assets....................... 178 2 --
Pension and postretirement benefit costs............... 695 741 776
Deferred taxes......................................... 281 (178) (105)
Increase (decrease) in cash due to changes in:
Accounts receivable.................................... 242 208 (77)
Intercompany and other receivables..................... 37 (45) (55)
Inventories............................................ (249) 702 242
Prepaid expenses....................................... (4) 11 (2)
Trade accounts payables................................ 1,202 (518) 297
Accrued compensation and related costs................. 600 (371) 93
Taxes payable.......................................... 521 596 (2,068)
Other accrued liabilities.............................. (22) (11) 89
Postretirement and pension and other long-term
obligations.......................................... (876) (118) (331)
------- ------- -------
Net cash provided by operating activities......... 9,862 8,579 3,705
------- ------- -------
Cash used in investing activities -- capital expenditures... (1,825) (1,005) (2,326)
------- ------- -------
Cash used in financing activities -- other changes in
divisional equity......................................... (8,037) (7,422) (1,513)
------- ------- -------
Net increase (decrease) in cash................... -- 152 (134)
Cash at beginning of year................................... -- -- 152
------- ------- -------
Cash at end of year......................................... $ -- $ 152 $ 18
======= ======= =======
Supplemental disclosure of non-cash financing
activities -- fixed assets transferred to UCAR............ $ 272 $ 74 $ --
======= ======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-6
<PAGE> 86

GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) DISCUSSION OF BUSINESS AND STRUCTURE

UCAR Graph-Tech Inc. was incorporated in August 1999 and, effective June
29, 2000, changed its name to Graftech Inc. (Company or Graftech) (see note 11).
Graftech is a world leader in the development of high quality, natural
graphite-based products. The Company's business remained a division of UCAR
International Inc. until January 2000, at which time substantially all assets
used in the business of the division (other than certain real property, which is
leased to the Company under a long-term lease), and all liabilities arising out
of the business, were contributed to Graftech. Net intercompany balances were
settled with UCAR and are reflected as other changes in divisional equity in the
statements of stockholders' equity. All expenses allocable to Graftech are
included in the accompanying financial statements.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) INVENTORIES

Inventories are stated at cost or market, whichever is lower. Cost is
determined using the "average cost" method.

(b) FIXED ASSETS AND DEPRECIATION

Fixed assets are carried at cost. Expenditures for replacements are
capitalized and the replaced items are retired. Except as otherwise disclosed,
gains and losses from the sale of fixed assets are included in other (income)
expense, net.

Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets, which are 20 years for land improvements and range
from 25 to 40 years for building improvements and 3 to 10 years for machinery,
equipment and other.

The carrying value of fixed assets is assessed when factors indicating
impairment are present. The Company determines such impairment by measuring
undiscounted future cash flows. If impairment is present, the assets are
reported at fair value.

Revenue is recognized upon transfer of title or when risks and benefits of
ownership have been transferred.

(d) RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as incurred.

(e) INCOME TAXES

The Company is included in the consolidated federal income tax returns of
UCAR. For purposes of preparing the financial statements, the separate return
method has been used for allocating federal income taxes.

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and for operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected

F-7
<PAGE> 87
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

to apply to taxable income in the years in which temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period that
includes the enactment date.

(f) STOCK BASED COMPENSATION PLANS

UCAR accounts for stock-based compensation plans using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). As such, compensation expense is recorded
on the date of grant only if the market price of the underlying stock exceeded
the exercise price or if ultimate vesting is subject to performance conditions.
The total amount of recorded compensation expense, if any, is based on the
number of awards that eventually vest. No compensation expense is recognized for
forfeited awards, failure to satisfy a service requirement or failure to satisfy
a performance condition. UCAR's accruals of compensation expense for awards
subject to performance conditions are based on an assessment of the probability
of satisfying the performance conditions. Compensation expense with respect to
UCAR options issued to Company employees has been included in the accompanying
financial statements.

(g) RETIREMENT PLAN

The Company participates in UCAR's retirement plans. The cost of pension
benefits under the plans is determined by an independent actuarial firm using
the "projected unit credit" actuarial cost method. Contributions to the
retirement plan are made in accordance with the requirements of the Employee
Retirement Income Security Act of 1974.

(h) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

The estimated cost of future medical and life insurance benefits is
determined by an independent actuarial firm using the "projected unit credit"
actuarial cost method. Such costs are recognized as employees render the service
necessary to earn the postretirement benefits. Benefits have been accrued, but
not funded.

(i) POSTEMPLOYMENT BENEFITS

The Company accrues postemployment benefits expected to be paid,
principally severance, over employees' active service periods.

(j) EARNINGS PER SHARE

Basic earnings per share are computed based on the weighted average common
shares outstanding taking into consideration the initial capitalization of the
Company as if it were a stock split and excludes any potential dilution. Diluted
earnings per share reflects the potential dilution from the exercise or
conversion of all dilutive securities into common stock.

(k) COMPREHENSIVE INCOME

The Company had no items of other comprehensive income during the three
years ended December 31, 1999. Thus, comprehensive income equals net income for
all periods.

(l) USE OF ESTIMATES

Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare the financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
F-8
<PAGE> 88
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(3) SEGMENT REPORTING

The following tables summarize information as to the Company's operations
in different geographic areas:

<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net sales(a):
United States............................... $29,926 $30,141 $27,595
Other countries............................. 7,754 7,448 6,187
------- ------- -------
Total............................... $37,680 $37,589 $33,782
======= ======= =======
</TABLE>

---------------
(a) Net sales are based on location of buyer.

One customer accounted for 34%, 35% and 32% of net sales for 1997, 1998 and
1999, respectively. Accounts receivable from such customer were $1,875, $1,131
and $1,737 at December 31, 1997, 1998 and 1999, respectively. Such percentages
and amounts include companies acquired by the customer for all periods
indicated.

(4) INCOME TAXES

Income tax expense attributable to income from operations consists of:

<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
U.S. federal income taxes:
Current........................................ $3,496 $4,005 $2,240
Deferred....................................... 240 (153) (90)
------ ------ ------
3,736 3,852 2,150
------ ------ ------
State income taxes:
Current........................................ 597 684 381
Deferred....................................... 41 (25) (15)
------ ------ ------
638 659 366
------ ------ ------
$4,374 $4,511 $2,516
====== ====== ======
</TABLE>

Amounts due to UCAR for income taxes were $4,374, $4,511 and $2,516 in
1997, 1998 and 1999, respectively. Such amounts are included in other changes in
divisional equity for years prior to 1999. Income tax expense attributable to
income from operations differed from the amounts computed by applying the U.S.
federal income tax rate of 35% to pretax income from operations as a result of
the following:

<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Statutory U.S. federal tax rate......................... 35% 35% 35%
State taxes............................................. 6 6 6
-- -- --
Total tax rate................................ 41% 41% 41%
== == ==
</TABLE>

F-9
<PAGE> 89
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1999 were as follows:

<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
------------------
1998 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Postretirement and other employee benefits................ $1,772 $1,984
Other..................................................... -- 54
------ ------
Total deferred tax assets......................... 1,772 2,038
Deferred tax liabilities -- furniture, fixtures and
equipment................................................. 3,326 3,487
------ ------
Net deferred tax liability................................ $1,554 $1,449
====== ======
</TABLE>

Deferred income tax assets and liabilities are classified on a net current
and noncurrent basis. Net current deferred income tax assets are included in
prepaid expenses and other current assets in the amounts of $152 and $303 at
December 31, 1998 and 1999, respectively.

(5) RELATED PARTY

The Company is a wholly owned subsidiary of UCAR. As a wholly owned
subsidiary of UCAR, the Company has received various services provided by UCAR,
including, among others, administration, accounting, human resources and legal.
UCAR has also provided the Company with the services of a number of its
executives and employees. In consideration for these services, UCAR has
historically allocated a portion of its overhead costs related to such services
to the Company. The Company's management believes that the amounts allocated
have been no less favorable to the Company than the expenses would have been to
obtain such services from unaffiliated third parties. The Company's management
also believes that the amounts allocated have been substantially the same as
what they would have been had the Company been operating on a standalone basis,
except for allocation of depreciation instead of rent for the Company's
Lakewood, Ohio facility (see note 7). With the exception of the agreements set
forth below, as amended June 29, 2000, none of these services have been provided
to the Company pursuant to any written agreement between it and UCAR.

(a) TRANSFER AGREEMENT

Pursuant to a transfer agreement, effective January 1, 2000, UCAR
transferred substantially all of the assets (other than real estate) of its
worldwide natural, acid treated and flexible graphite business to the Company
and the Company assumed and agreed to indemnify UCAR for all known liabilities
as of January 1, 2000 arising out of the business, and for all known and unknown
liabilities since January 1, 2000 arising out of the business not related to
property. Pursuant to amendments to the transfer agreement, UCAR made an
additional contribution of real property located in Parma, Ohio to the Company
and transferred to the Company the funds held in UCAR's qualified retirement
plan related to Company employees.

F-10
<PAGE> 90
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(b) INTELLECTUAL PROPERTY TRANSFER AGREEMENT

Pursuant to an intellectual property transfer agreement, UCAR transferred
all intellectual property related to the business to the Company. In furtherance
of the intellectual property transfer agreement, the Company entered into:

- an assignment of improvements,

- an assignment of technology,

- an assignment and assumption of technology contracts,

- an assignment of U.S. patents,

- an assignment of U.S. patent applications,

- an assignment of jointly owned patent applications,

- an assignment of Canadian patents,

- an assignment of Canadian patent applications,

- an assignment of foreign patents and patent applications,

- a United States trademark assignment, and

- a foreign trademark assignment.

The Company entered into a corporate services agreement with UCAR pursuant
to which UCAR agreed to continue to provide legal, accounting, tax, corporate
human resources/benefits administration, information systems, treasury/risk
management and investor relation services to the Company. The fees for such
services are calculated as if the Company were a division of UCAR and are based
on an estimate of actual time spent performing services on behalf of the
Company. Such fees currently are $974 per year. Costs previously allocated to
the Company with respect to such services have been determined on the same basis
as the agreement and are included in selling, administrative and other expenses
in the Statement of Operations. They were $780, $804 and $828 in 1997, 1998 and
1999, respectively.

Additionally, UCAR will allow the Company's employees to continue to
participate in UCAR's corporate relocation, pension, savings, medical and other
welfare plans, with costs allocated based on the Company's total payrolled
number of employees or actual costs, whichever method most accurately reflects
the costs attributable to the Company. Costs were allocated to the Company with
respect to such services on the same basis as the agreement for all periods and
were $2,254, $2,455 and $2,692 in 1997, 1998 and 1999, respectively.

The corporate services agreement also allows the Company to continue to use
the UCAR Process and Product Development Center in Parma, Ohio for a period of
two and a half years, with the option to extend the Company's use on a year to
year basis, at a specified rent based on actual usage of such facilities for
such items as space and supplies (based on items for which there is a specific
cost or pool of items for which there is a specific cost) and time incurred by
personnel on behalf of the Company. Costs previously allocated to the Company
with respect to such services have been determined on the same basis as the
agreement, based on estimated actual usage of such facilities and the personnel
working on behalf of the Company, and represent all amounts included in research
and development in the Statement of Operations.

F-11
<PAGE> 91
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(d) TAX SHARING AGREEMENT

The Company entered into a tax sharing agreement with UCAR which provides
for the filing of consolidated tax returns on behalf of the Company. The Company
reimburses UCAR as requested for any interim payments made on its behalf, with
final settlement being made at the end of the year.

(e) FUTURE AGREEMENTS

The Company's board of directors has adopted a policy that any future
transactions with UCAR will be on terms no less favorable to the Company than
are reasonably available from unrelated third parties and must first be approved
by a majority of the Company's directors who do not have a material interest in
the transactions.

(f) FINANCIAL ARRANGEMENTS

There are no financial arrangements between the Company and UCAR except
that the Company's cash management activities have been together with those of
UCAR's cash management activities and excess unused cash has been retained by
UCAR. These arrangements ended as of December 31, 1999.

(6) FIXED ASSETS

Fixed assets consisted of the following at December 31, 1998 and 1999:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
------- -------
<S> <C> <C>
Fixed assets:
Land improvements........................................ $ 781 $ 787
Building improvements.................................... 776 776
Machinery, equipment and other........................... 21,554 21,586
Construction in progress................................. 845 2,459
------- -------
$23,956 $25,608
======= =======
</TABLE>

(7) LEASES

Lease commitments under noncancelable operating leases extending for one
year or more will require the following future payments:

<TABLE>
<S> <C>
2000........................................................ $ 307
2001........................................................ 292
2002........................................................ 247
2003........................................................ 214
2004........................................................ 213
After 2004.................................................. 1,066
</TABLE>

Total lease and rental expenses under noncancelable operating leases
extending one month or more were $112, $131 and $115 in 1997, 1998 and 1999,
respectively.

Effective January 1, 2000, as amended June 29, 2000, the Company entered
into a ten-year operating lease agreement, with one five-year extension, with
UCAR related to the principal building in which the Company operates. Payments
under the lease are $213 per year for the first five years. Every five years
thereafter, the rent will be reset to fair market value. Prior to entering into
the agreement, the Company

F-12
<PAGE> 92
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

has been allocated depreciation expense with respect to the use of the building
in the amount of $8, $13 and $14 for 1997, 1998 and 1999, respectively.

(8) BENEFIT PLANS

(a) RETIREMENT PLANS AND POSTRETIREMENT BENEFIT PLANS

Until February 25, 1991, the Company participated in the U.S. retirement
plan of Union Carbide Corporation (Union Carbide). Effective February 26, 1991,
the Company began participating in the UCAR retirement plan. Retirement and
death benefits related to employee service through February 25, 1991 are covered
by the Union Carbide plan. Benefits paid by the Union Carbide plan are based on
final average pay through February 25, 1991, plus salary increases (not to
exceed 6% per year) until January 26, 1995 when Union Carbide ceased to own at
least 50% of the equity of UCAR. Pension benefits under the UCAR plan are based
primarily on years of service and compensation levels prior to retirement. Net
pension costs for the Company were $478, $514 and $534 in 1997, 1998 and 1999,
respectively.

The Company also provides health care and life insurance benefits for
eligible retired employees. These benefits are provided through various
insurance companies and health care providers. The Company accrues the estimated
net postretirement benefit costs during the employees' credited service between
ages 45 and 55.

The components of the Company's net pension costs are as follows:

<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $458 $528 $564
Interest cost......................................... 420 460 514
Expected return on assets............................. (401) (475) (545)
Amortization.......................................... 1 1 1
---- ---- ----
Net pension cost.................................... $478 $514 $534
==== ==== ====
</TABLE>

The components of the Company's net postretirement benefit costs are as
follows:

<TABLE>
<CAPTION>
FOR YEARS ENDED
DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $173 $205 $169
Interest cost......................................... 166 144 156
Amortization of prior service cost.................... (122) (122) (83)
---- ---- ----
Net postretirement benefit cost..................... $217 $227 $242
==== ==== ====
</TABLE>

F-13
<PAGE> 93
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of beginning and ending balances of benefit obligations
under, and fair value of assets of, all pension and postretirement benefit
obligations of the Company, and the funded status of the obligations, are as
follows:

<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
------------------ ------------------------
1998 1999 1998 1999
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Changes in benefit obligation:
Net benefit obligation at beginning of
year................................. $ 6,605 $ 7,652 $ 2,090 $ 2,252
Service cost............................ 528 564 205 169
Interest cost........................... 460 514 144 156
Plan amendments......................... -- -- -- (169)
Actuarial (gain) loss................... 93 (1,113) (126) (1)
Gross benefits paid..................... (34) (50) (61) (65)
------- ------- ------- -------
Net benefit obligation at end of
year............................... $ 7,652 $ 7,567 $ 2,252 $ 2,342
======= ======= ======= =======
Changes in plan assets:
Fair value of plan assets at beginning
of year.............................. $ 5,974 $ 6,935 $ -- $ --
Actual return on plan assets............ 938 932 -- --
Employer contributions.................. 57 266 -- --
Gross benefits paid..................... (34) (50) -- --
------- ------- ------- -------
Fair value of plan assets at end of
year............................... $ 6,935 $ 8,083 $ -- $ --
======= ======= ======= =======
Reconciliation of funded status:
Funded status at end of year............ $ (717) $ 516 $(2,252) $(2,342)
Unrecognized prior service cost......... 8 6 (57) (143)
Unrecognized net actuarial gain......... (537) (2,036) (288) (289)
------- ------- ------- -------
Net amount recognized at end of
year............................... $(1,246) $(1,514) $(2,597) $(2,774)
======= ======= ======= =======
</TABLE>

Assumptions used to determine net pension costs, pension projected benefit
obligation, net postretirement benefit costs and postretirement benefits
projected benefit obligation are as follows:

<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
---------------- --------------
1998 1999 1998 1999
------ ------ ----- -----
<S> <C> <C> <C> <C>
Weighted average assumptions as of measurement
date:
Discount rate.................................... 6.75% 8.00% 6.75% 8.00%
Expected return on plan assets................... 9.00% 9.00% N/A N/A
Rate of compensation increase.................... 4.25% 5.00% 4.25% 5.00%
Health care cost trend on covered charges:
Initial.......................................... N/A N/A 7.75% 7.75%
Ultimate......................................... N/A N/A 4.75% 5.50%
Years to ultimate................................ N/A N/A 6 5
=== === === ===
</TABLE>

Assumed health care cost trend rates have a significant effect on the
amounts reported for net postretirement benefits. A one-percentage-point change
in the health care cost trend rate would change the accumulated postretirement
benefits obligation by approximately $113 for December 31, 1999 and change net
postretirement benefit costs by approximately $16 for 1999. The 1999 plan
amendment for postretirement benefits relates primarily to capping the
obligation for certain future medical benefits.

F-14
<PAGE> 94
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(b) SAVINGS PLAN

The Company's employees participate in UCAR's savings plan which provides
eligible employees the opportunity for long-term savings and investment.
Participating employees can contribute 1.0% to 7.5% of employee compensation as
basic contributions and an additional 0.5% to 10.0% of employee compensation as
supplemental contributions. The Company contributes on behalf of each
participating employee an amount equal to 30% for 1997, and 50% for 1998 and
1999, of the employee's basic contribution. The Company contributed $103, $165
and $184 in 1997, 1998 and 1999, respectively.

In 1997, UCAR provided group profit sharing plans for employees in various
subsidiaries. Costs for these profit sharing plans were $747 in 1997. Effective
January 1, 1998, UCAR implemented a global profit sharing plan for all worldwide
employees. This plan is based on the global financial performance of UCAR. The
cost for this plan related to Company employees was $664 in 1998 and zero in
1999.

Additionally, UCAR instituted a management incentive plan in which certain
of the Company's management participate. Costs allocated to the Company with
respect to this plan were $190, zero and $546 in 1997, 1998 and 1999,
respectively.

(9) STOCK OPTIONS

UCAR has adopted several stock option plans in which Company employees are
eligible to participate.

UCAR applies APB 25 in accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for the time vesting
options issued to Company employees. The compensation expense that has been
charged against income for performance vesting options issued to Company
employees was $188 in 1997 and zero in 1998 and 1999. No cost related to
performance vesting options issued to Company employees was recorded in 1998 and
1999 because no performance options vested in those years. If compensation
expense for UCAR's stock-based compensation plans was determined by the fair
value method prescribed by Statement of Financial Accounting Standards 123, the
Company's pro forma net income would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
-------- ------ ------
<S> <C> <C> <C>
Net income:
As reported.......................................... $6,258 $6,459 $3,583
Pro forma............................................ 5,440 6,414 3,140
</TABLE>

The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for grants in 1997, 1998 and 1999: dividend yield of 0% for all
years; expected volatility of 30% in 1997, 35% in 1998 and 45% in 1999;
risk-free interest rates of 6.4% in 1997, 4.9% in 1998 and 5.4% in 1999; and
expected lives of 7 years in 1997 and 1998, and 8 years in 1999.

(10) COMMITMENTS AND CONTINGENCIES

(a) LITIGATION

F-15
<PAGE> 95
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

it is not possible to determine the ultimate disposition of each of these
proceedings, the Company believes that the ultimate disposition of these
proceedings will not have a material adverse effect on the financial condition
or results of operations of the Company.

(b) BALLARD POWER SYSTEMS INC.

In 1999, the Company entered into a nine year requirements contract with
Ballard Power Systems Inc. The requirements contract provides that the Company
will supply Ballard with its products for use in flow field plates. Under the
requirements contract, Ballard must buy from the Company any flexible graphite
material used in its production of flow field plates. Ballard has no obligation
to buy any minimum quantity of the Company's products.

(11) SUBSEQUENT EVENTS

(a) CERTIFICATE OF INCORPORATION AND STOCK SPLIT

The certificate of incorporation of Graftech, as amended on June 29, 2000,
authorizes the issuance of up to 200,000,000 shares of $.01 par value common
stock and 20,000,000 shares of $.01 par value preferred stock. The holders of
common stock will share ratably in any dividends declared, subject to
preferential rights of any holders of any outstanding preferred stock. Holders
of common stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, including election of directors. Upon any liquidation,
dissolution or winding up of Graftech, holders of common stock are entitled to
share ratably in any assets available for distribution in respect of common
stock. On June 29, 2000, Graftech declared a 298,500 for 1 stock split. The
Financial Statements have been retroactively restated to reflect these
transactions.

F-16
<PAGE> 96

GRAFTECH INC.

BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 18 $ 28
Accounts receivable, net of allowance of $130............. 4,891 6,192
Other receivables......................................... 176 182
Intercompany receivable................................... 68 601
Inventories:
Raw materials and supplies.............................. 549 543
Work in process......................................... 881 995
Finished goods.......................................... 1,302 1,195
------- -------
Total inventories.................................. 2,732 2,733
------- -------
Prepaid expenses and other current assets................. 317 647
------- -------
Total current assets............................... $ 8,202 $10,383
------- -------
Fixed assets................................................ 25,608 26,220
Less: accumulated depreciation.............................. (9,639) (9,930)
------- -------
Net fixed assets................................... 15,969 16,290
------- -------
Total assets....................................... $24,171 $26,673
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Trade accounts payable.................................... $ 1,584 $ 2,019
Accrued compensation and related costs.................... 1,274 1,064
Taxes payable............................................. 2,621 3,342
Other accrued liabilities................................. 176 470
------- -------
Total current liabilities.......................... 5,655 6,895
Postretirement benefits, other than pensions................ 2,774 2,819
Pension and related benefits................................ 1,514 1,534
Deferred compensation....................................... -- 102
Deferred taxes, net......................................... 1,752 1,732
------- -------
Total liabilities.................................. 11,695 13,082
------- -------
Stockholder's equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized, none issued or outstanding.................. -- --
Common stock, $.01 par value; 200,000,000 shares
authorized, 29,850,000 shares issued and outstanding at
March 31, 1999 and 2000................................. 299 299
Divisional equity........................................... 12,177 --
Additional paid-in capital.................................. -- 12,357
Retained earnings........................................... -- 935
------- -------
Total stockholder's equity......................... 12,476 13,591
------- -------
Commitments, contingencies and subsequent event
Total liabilities and stockholder's equity......... $24,171 $26,673
======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-17
<PAGE> 97

GRAFTECH INC.

STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
------- -------
<S> <C> <C>
Third party................................................. $8,570 $9,180
Intercompany................................................ 208 320
------ ------
Net sales................................................. 8,778 9,500
------ ------
Third party................................................. 5,278 6,022
Intercompany................................................ 152 167
------ ------
Cost of sales............................................. 5,430 6,189
------ ------
Gross profit...................................... 3,348 3,311
------ ------
Research and development.................................... 384 446
Selling, administrative and other expenses.................. 1,180 1,268
Other (income) expense, net................................. 13 12
------ ------
1,577 1,726
------ ------
Operating profit.................................. 1,771 1,585
Provision for income taxes.................................. 730 650
------ ------
Net income........................................ $1,041 $ 935
====== ======
Earnings per common share
Basic earnings per share.......................... $ 0.03 $ 0.03
Diluted earnings per share........................ $ 0.03 $ 0.03
====== ======
</TABLE>

See accompanying Notes to Financial Statements.
F-18
<PAGE> 98

GRAFTECH INC.

STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON DIVISIONAL PAID-IN RETAINED STOCKHOLDER'S
STOCK EQUITY CAPITAL EARNINGS EQUITY
------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999................ $299 $ 12,177 $ -- $ -- $12,476
Contribution of building.................. -- -- 180 -- 180
Transfer of divisional equity to
additional paid-in capital upon
incorporation.......................... -- (12,177) 12,177 -- --
Net income................................ -- -- -- 935 935
---- -------- ------- ---- -------
Balance at March 31, 2000................... $299 $ -- $12,357 $935 $13,591
==== ======== ======= ==== =======
</TABLE>

See accompanying Notes to Financial Statements.
F-19
<PAGE> 99

GRAFTECH INC.

STATEMENTS OF CASH FLOWS
>FOR THE THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income................................................ $ 1,041 $ 935
Non-cash (credits) charges to net income:
Depreciation and amortization.......................... 285 311
Provision for doubtful accounts........................ 130 --
Pension and postretirement benefit costs............... 111 65
Deferred compensation.................................. -- 102
Deferred taxes......................................... 34 (20)
Increase (decrease) in cash due to changes in:
Accounts receivable.................................... (1,467) (1,301)
Other receivables...................................... 10 (539)
Inventories............................................ 29 (1)
Prepaid expenses....................................... 12 (330)
Trade accounts payable................................. (121) 414
Accrued compensation and related costs................. (494) (210)
Taxes payable.......................................... (3,993) 721
Other accrued liabilities.............................. 5 294
------- -------
Net cash (used in) provided by operating
activities....................................... (4,418) 441
------- -------
Cash used in investing activities -- capital
Expenditures.............................................. (499) (611)
------- -------
Cash provided by financing activities -- other changes in
divisional equity......................................... 4,989 180
------- -------
Net increase in cash.............................. 72 10
Cash at beginning of period................................. 152 18
------- -------
Cash at end of period....................................... $ 224 $ 28
======= =======
Supplemental disclosure of non-cash financing
activities -- fixed assets contributed by UCAR............ $ -- $ (180)
======= =======
</TABLE>

See accompanying Notes to Financial Statements.
F-20
<PAGE> 100

GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

(1) INTERIM FINANCIAL PRESENTATION

The interim Financial Statements are unaudited; however, in the opinion of
management, they have been prepared in accordance with Rule 10-01 of Regulation
S-X adopted by the Securities and Exchange Commission and reflect all
adjustments (all of which are of a normal, recurring nature) which are necessary
for a fair presentation of financial position, results of operations and cash
flows for the periods presented. Results of operations for the quarter ended
March 31, 2000 are not necessarily indicative of the results of operations that
may be expected for the entire year ending December 31, 2000.

(2) EARNINGS PER SHARE

(3) SEGMENT REPORTING

The following tables summarize information as to the Company's operations
in different geographic areas:

<TABLE>
<CAPTION>
FOR QUARTERS ENDED
MARCH 31,
------------------
1999 2000
------- -------
<S> <C> <C>
Net sales(a):
United States............................................. $7,240 $7,419
Other countries........................................... 1,538 2,081
------ ------
Total............................................. $8,778 $9,500
====== ======
</TABLE>

---------------
(a) Net sales are based on location of buyer.

One customer accounted for 34.2% and 34.0% of net sales for the quarters
ended March 31, 1999 and 2000, respectively. Accounts receivable from such
customers were $1,878 and $1,995 at December 31, 1999 and March 31, 2000,
respectively. Such percentages and amounts include companies acquired by the
customer for all periods indicated.

(4) RELATED PARTY

The Company is a wholly owned subsidiary of UCAR. As a wholly owned
subsidiary of UCAR, the Company has received various services provided by UCAR,
including, among others, administration, accounting, human resources and legal.
UCAR has also provided the Company with the services of a number of its
executives and employees. In consideration for these services, UCAR has
historically allocated a portion of its overhead costs related to such services
to the Company. The Company's management believes that the amounts allocated
have been no less favorable than the expenses would have been to obtain such
services from unaffiliated third parties. With the exception of the agreements
set forth below, none of these services have been provided to the Company
pursuant to any written agreement between it and UCAR.

F-21
<PAGE> 101
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company entered into a corporate services agreement with UCAR pursuant
to which UCAR agreed to continue to provide legal, accounting, tax, corporate
human resources/benefits administration, information systems, treasury/risk
management and investor relation services to the Company. The fees for such
services are calculated as if the Company were a division of UCAR and are based
on an estimate of actual time spent performing service on behalf of the Company.
Such fees currently are $830 per year. Costs previously allocated to the Company
with respect to such services have been determined on the same basis as the
agreement and are included in selling, administrative and other expenses in the
Statement of Operations. They were $207 in both the quarters ended March 31,
1999 and 2000.

Additionally, UCAR will allow the Company's employees to continue to
participate in UCAR's corporate relocation, pension, savings, medical and other
welfare plans, with costs allocated based on the Company's total payrolled
number of employees or actual costs, whichever method most accurately reflects
the costs attributable to the Company. Costs were allocated to the Company with
respect to such services on the same basis as the agreement for all periods and
were $657 and $853 in the quarters ended March 31, 1999 and 2000, respectively.

The corporate services agreement also allows the Company to continue to use
the UCAR Product and Process Development Center in Parma, Ohio for a period of
five years, with the option to extend the Company's use on a year to year basis
for five additional years, at a specified rent based on actual usage of such
facilities for such items as space and supplies (based on items for which there
is a specific cost or pool of items for which there is a specific cost) and time
incurred by personnel on behalf of the Company. Costs previously allocated to
the Company with respect to such services have been determined on the same basis
as the agreement, based on estimated actual usage of such facilities and the
personnel working on behalf of the Company, and represent all amounts included
in research and development in the Statement of Operations. Costs relating to
the Parma, Ohio facility were $384 and $191 in the quarters ended March 31, 1999
and 2000, respectively.

(5) COMMITMENTS AND CONTINGENCIES

The Company is involved in various investigations, lawsuits, claims and
other legal proceedings incidental to the conduct of its business. Among others,
it is currently involved in a wrongful termination lawsuit brought in Italy by a
former distributor. The Company is vigorously contesting this lawsuit. While it
is not possible to determinate the ultimate disposition of each of these
proceedings, the Company believes that the ultimate disposition of these
proceedings will not have a material adverse effect on the on the financial
condition or results of operations of the Company.

(6) SUBSEQUENT EVENTS

(a) CERTIFICATE OF INCORPORATION AND STOCK SPLIT

F-22
<PAGE> 102
GRAFTECH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(b) MAZARIN MINING CORPORATION INC. (MAZARIN)

In order to assure an adequate supply of high-quality, low-cost natural
graphite flake, the Company has entered into a memorandum of understanding with
Mazarin relating to an arrangement to develop and commercialize a natural
graphite deposit located near Fermont, Quebec, Canada. During the initial phase
of the arrangement, the Company will conduct a feasibility study, which is
expected to be completed by the end of 2002 for which the Company will receive a
25% interest in the mine. After completion of the study, the Company may decide
to commence commercial production of the deposit with Mazarin, exercise an
option to extend the period for the development decision for five one-year
periods until 2007, or terminate the arrangement. In the case of an extension,
the Company will have to make option payments totaling $7.5 million (Canadian)
if the option period is extended for the full five years. If a development
decision is made, commercial production could start as early as 2004. Upon
commencement of commercial production, the Company would enter into a long-term
off-take contract for the natural graphite flake at a predetermined price.
Consummation of the arrangement is subject to, among other things, the
negotiation and execution of definitive agreements, completion of due diligence
by the parties, and the receipt of any required governmental approvals.

On June 29, 2000, the board of directors approved the Graftech Inc. Outside
Director Equity Incentive Plan and the Graftech Inc. Employee Equity Incentive
Plan under which 400,000 and 4,600,000 shares, respectively, have been reserved
for issuance of which the board has granted 41,600 and 251,550 options,
respectively, which will become effective on the date of the initial public
offering with an exercise price at the initial public offering price. Both plans
will become effective upon completion of the Company's initial public offering.

F-23
<PAGE> 103

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated,
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 28,690
NASD filing fee............................................. 11,368
Nasdaq National Market listing fee.......................... 1,000
Printing and engraving expenses............................. 300,000
Legal fees and expenses..................................... 800,000
Accounting fees and expenses................................ 400,000
Blue Sky fees and expenses (including legal fees)........... 10,000
Transfer agent and registrar fees and expenses.............. 10,000
Miscellaneous............................................... 438,942
----------
Total............................................. $2,000,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

We are incorporated under the laws of the State of Delaware. Section 145
("SECTION 145") of the General Corporation Law of the State of Delaware (the
"GENERAL CORPORATION LAW"), inter alia, provides that a Delaware corporation may
indemnify any person who was or is threatened to be made parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal.

Section 145 further authorizes a Delaware corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise against any liability asserted against him in any such
capacity, whether or not such corporation would otherwise have the power to
indemnify him under Section 145.

As permitted by Section 102(b)(7) of the General Corporation Law, our
Certificate of Incorporation includes a provision that eliminates the personal
liability of our directors for monetary damages for breach of fiduciary duty as
a director, except for liability:

- for any breach of the director's duty of loyalty to us or our
stockholders,

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,

- under Section 174 of the General Corporation Law regarding unlawful
dividends and stock purchases, or

- for any transaction from which the director derived an improper personal
benefit.

II-1
<PAGE> 104

Our bylaws provide that:

- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law,

- we may indemnify our other employees and agents to the same extent that
we are required to indemnify our officers and directors, unless otherwise
determined by our Board of Directors, and

- we must advance expenses, as incurred, to our directors and officers in
connection with any legal proceeding to the fullest extent permitted by
Delaware law.

As a majority-owned subsidiary of UCAR, our directors and officers are
covered by UCAR's directors' and officers' insurance policy which provides
coverage for directors and officers of UCAR and its subsidiaries against various
claims, losses and liabilities, including liabilities arising under securities
laws. The policy covers up to $75 million in claims, losses and expenses. We
will pay a portion of the premium for this policy. In addition, pursuant to a
stockholder's agreement between us and UCAR, we have agreed to indemnify UCAR
against liabilities under the Securities Act, or contribute to payments which
UCAR may be required to make in that respect.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since our incorporation in August 1999, we have issued 29,850,000 shares
(as adjusted for our recent split) of our common stock that were not registered
under the Securities Act in consideration of the net assets of UCAR related to
UCAR's worldwide natural, acid-treated and flexible graphite business which we
received from UCAR. Such issuance was exempt from registration under the
Securities Act pursuant to Section 4(2) because it was a transaction by an
issuer that did not involve a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement among Credit Suisse First
Boston Corporation, on behalf of the underwriters, UCAR
Carbon Company Inc. and Graftech Inc.
3.1 Amended and Restated Certificate of Incorporation of
Graftech Inc.
3.2 Amended and Restated Bylaws of Graftech Inc.
5.1 Form of Opinion of Kelley Drye & Warren LLP (including the
consent of such firm) as to the validity of the securities
being offered.
10.1 Transfer Agreement, dated as of January 1, 2000, between
UCAR Carbon Company Inc. and Graftech Inc.
10.2 Corporate Services Agreement, dated as of January 1, 2000,
between UCAR Carbon Company Inc. and Graftech Inc.
10.3 Tax Sharing Agreement, dated as of February 16, 2000,
between UCAR Carbon Company Inc. and Graftech Inc.
10.4 Lease Agreement, dated as of January 1, 2000, between UCAR
Carbon Company Inc. and Graftech Inc.
10.5 Intellectual Property Transfer Agreement, dated as of
December 28, 1999, between UCAR Carbon Technology
Corporation and Graftech Inc.
10.6** Collaboration Agreement, dated May 3, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
10.7** Supply Agreement, dated as of August 5, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
10.8 Employee Equity Incentive Plan of Graftech Inc.
10.9 Outside Director Equity Incentive Plan of Graftech Inc.
10.10 Management Incentive Plan of Graftech Inc.
</TABLE>

II-2
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.11 Form of Employment Agreement between John J. Wetula and
Graftech Inc.
10.12 Form of Severance Compensation Agreement of Graftech Inc.
10.13 Form of Stockholder's Agreement between UCAR International
Inc. and Graftech Inc.
10.14** Memorandum of Understanding dated April 12, 2000 between
Mazarin Mining Corporation Inc. and Graftech Inc.
10.15 Form of Non-Qualified Stock Option Agreement for Employee
Equity Incentive Plan.
10.16 Form of Non-Qualified Stock Option Agreement for Outside
Director Equity Incentive Plan.
23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit
5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Ballard Power Systems Inc.
24.1 Power of Attorney (on the signature page).
27.1 Financial Data Schedule (Annual).
27.2 Financial Data Schedule (Quarterly).
</TABLE>

---------------
* To be filed by amendment.

** Information has been omitted. Confidential treatment has been requested as
to certain portions, and the omitted portions have been separately filed.

(b) FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted because they are not
required or applicable or because the information is included in the Financial
Statements or the notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 106

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cleveland,
Ohio, on the 30th day of June, 2000.

Graftech Inc.

By: /s/ JOHN J. WETULA
------------------------------------
John J. Wetula
Chief Executive Officer and
President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below hereby constitutes and appoints Gilbert E. Playford, John J.
Wetula, Erick A. Asmussen, William C. P'Pool and Karen G. Narwold, and each of
them individually, his true and lawful agent, proxy and attorney-in-fact, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to (i) act on, sign and file with the
Securities and Exchange Commission any and all amendments to this registration
statement (which includes any additional registration statement under Rule
462(b)) together with all schedules and exhibits thereto, (ii) act on, sign and
file with the Securities and Exchange Commission any and all exhibits to this
registration statement and any and all exhibits and schedules thereto, (iii) act
on, sign and file any and all applications, registration statements, notices,
reports and other documents necessary or appropriate in connection with the
registration or qualification under foreign and state securities laws of the
securities described in this registration statement or any amendment thereto, or
obtain an exemption therefrom, in connection with the offering described
therein, (iv) act on, sign and file any and all applications, notices, reports
and other documents necessary or appropriate in connection with listing the
common stock described in this registration statement or any amendment thereto
on The Nasdaq National Market or any other stock market or securities exchange
in connection with such offering, (v) act on, sign and file any and all such
certificates, instruments, agreements and other documents as may be necessary or
appropriate in connection therewith and (vi) take any and all such actions which
may be necessary or appropriate in connection therewith, granting unto such
agents, proxies and attorneys-in-fact, and each of them individually, full power
and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.

II-4
<PAGE> 107

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ GILBERT E. PLAYFORD Chairman of the Board and Director June 30, 2000
---------------------------------------------------
Gilbert E. Playford

/s/ JOHN J. WETULA Chief Executive Officer, President June 30, 2000
--------------------------------------------------- and Director (Principal Executive
John J. Wetula Officer)

/s/ SCOTT C. MASON Chief Financial Officer and Vice June 30, 2000
--------------------------------------------------- President (Principal Financial
Scott Mason and Accounting Officer)

/s/ JOHN HALL Director June 30, 2000
---------------------------------------------------
John Hall

/s/ MICHAEL NAHL Director June 30, 2000
---------------------------------------------------
Michael Nahl
</TABLE>

II-5
<PAGE> 108

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of
Graftech Inc.
3.2 Amended and Restated Bylaws of Graftech Inc.
5.1 Form of Opinion of Kelley Drye & Warren LLP (including the
consent of such firm) as to the validity of the securities
being offered.
10.1 Transfer Agreement, dated as of January 1, 2000, between
UCAR Carbon Company Inc. and Graftech Inc.
10.2 Corporate Services Agreement, dated as of January 1, 2000,
between UCAR Carbon Company Inc. and Graftech Inc.
10.3 Tax Sharing Agreement, dated as of February 16, 2000,
between UCAR Carbon Company Inc. and Graftech Inc.
10.4 Lease Agreement, dated as of January 1, 2000, between UCAR
Carbon Company Inc. and Graftech Inc.
10.5 Intellectual Property Transfer Agreement, dated as of
December 28, 1999, between UCAR Carbon Technology
Corporation and Graftech Inc.
10.6** Collaboration Agreement, dated May 3, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
10.7** Supply Agreement, dated as of August 5, 1999, between UCAR
Carbon Company Inc. and Ballard Power Systems Inc.
10.8 Employee Equity Incentive Plan of Graftech Inc.
10.9 Outside Director Equity Incentive Plan of Graftech Inc.
10.10 Management Incentive Plan of Graftech Inc.
10.11 Form of Employment Agreement between John J. Wetula and
Graftech Inc.
10.12 Form of Severance Compensation Agreement of Graftech Inc.
10.13 Form of Stockholder's Agreement between UCAR International
Inc. and Graftech Inc.
10.14** Memorandum of Understanding dated April 12, 2000 between
Mazarin Mining Corporation Inc. and Graftech Inc.
10.15 Form of Non-Qualified Stock Option Agreement for Employee
Equity Incentive Plan.
10.16 Form of Non-Qualified Stock Option Agreement for Outside
Director Equity Incentive Plan.
23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit
5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Ballard Power Systems Inc.
24.1 Power of Attorney (on the signature page).
27.1 Financial Data Schedule (Annual).
27.2 Financial Data Schedule (Quarterly).
</TABLE>

---------------
** Information has been omitted. Confidential treatment has been requested as
to certain portions, and the omitted portions have been separately filed.

II-6